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YOUR MONEY - Is your boss watching your cholesterol?

(The author is a Reuters contributor. The opinions expressed are his own. This is part of a five-story package on employee benefits and open enrollment season.)

By Chris Taylor

NEW YORK, Oct 10 (Reuters) - If you're an employee who's looking to save money or make more of it, here's a little advice: Step away from the cigarettes and chocolate éclairs. They might cost you - and not just in your lungs or on your hips.

That's because more companies than ever are attaching financial rewards and penalties to their employees' health. Do a wellness screening, get $50. Stop smoking, enjoy lower insurance premiums. Hit a weight or cholesterol target, get a contribution to your health savings account.

If you don't do any of those things, you get bubkes - or you might even be penalized. Workers at Wal-Mart Stores Inc pay a surcharge of $10 per pay period if they smoke, for example.

"Companies are struggling to get people more engaged in their health, and financial incentives are an increasingly important piece of that puzzle," says Tom Billet, senior consultant for human resource consulting firm Towers Watson.

Indeed, some 61 percent of employers offered wellness-related financial rewards in 2012, up from 54 percent in 2011, according to Towers Watson. And 20 percent are now assessing penalties, up from 19 percent in 2011. (See Reuters graphic, ).

These wellness incentives have been expanding in scope rapidly. Consulting firm Aon Hewitt found that among employers offering health-based rewards, a full quarter are now attaching them to biometric outcomes like healthy blood pressure or lower body mass index. Last year, just 4 percent did so.

"I never would have expected that number to go to 25 percent so quickly," says Dr. Michael Cryer, Aon Hewitt's medical director. "But companies have been working on this for years already, getting people to know their numbers like blood pressure and weight and cholesterol. Now we're at the stage where they're encouraging employees to actively manage those numbers."

That raises troubling questions about such a nanny-like approach to employee health. Is it really your boss' business if you're gorging at buffets or running marathons? And doesn't it invoke shades of Big Brother, to be constantly monitored for things like blood pressure or glucose levels?

"It's a laudable goal to encourage employees to improve their health, but it's not clear this is the best way to go about it," says JoAnn Volk, a research professor at Georgetown University's Health Policy Institute, who co-authored a recent white paper on wellness incentives.

There are also serious legal questions, too, about health-related rewards and penalties. While they're allowed under health laws like HIPAA (the Health Insurance Portability and Accountability Act of 1996), that doesn't mean companies couldn't face potential action in the courts.

"You can't penalize workers if they have a family history of a certain condition, or a particular genetic makeup," says Volk. "There are also privacy issues, depending on who's running the program and whether the information is being kept confidential. So there are a number of different legal hurdles that companies need to clear."

THE TOBACCO TEST

Such rewards and penalties are most common regarding smoking, with 35 percent of companies offering some kind of carrot or stick to get employees off tobacco, according to Towers Watson. Minneapolis-based food giant General Mills Inc

gives $10 a month to employees who are tobacco-free, and has done so for years, says spokeswoman Maerenn Jepsen.

Companies typically trust employees to report their tobacco use honestly, says Jepsen. But nicotine use is easily uncovered with a simple urine test.

Of course, it's no wonder that companies are eager to whip their staffers into better physical shape. Employers are expected to spend $11,664 per employee on healthcare for 2012, according to Towers Watson, up from $10,982 last year. That's expected to rise on average in 2013 by 7 percent, according to a Kaiser Family Foundation survey.

Companies are obviously desperate to get those figures under control. Wal-Mart spokesman Randy Hargrove notes that smokers on average consume 25 percent more healthcare services than non-smokers. While tobacco users do face a surcharge, "We also offer a free quit-tobacco program where our associates can take advantage of a personal coach who can create a plan for them," Hargrove says.

After all, odds are a fit, non-smoking employee with a cholesterol level of 160 is going to rack up fewer healthcare costs in years to come than someone who is overweight with a blood cholesterol count of 300 milligrams per deciliter and smokes a couple of packs a day.

"One of the outcomes is that you control costs, but then you also reduce absenteeism and get higher productivity," says Mark Schmit, vice president of research for the Alexandria, Virginia-based Society for Human Resource Management (SHRM). "For every dollar you invest in wellness, you get a return of $3 to $6, so there's definitely a positive effect on the bottom line."

Leery employees shouldn't be concerned about such data being used against them, say experts. HIPAA expressly forbids that, notes SHRM's Schmit. Most companies use third-party benefits providers to run such wellness programs. That creates a firewall against any health information being shared internally.

Employees who worry that the information is being misused are not totally powerless. They can complain to the Department of Labor's Employee Benefits Security Administration (), or the Equal Employment Opportunity Commission (), says Georgetown's Volk.

And you certainly can turn down any health screening opportunities you're presented with. But you'll likely be missing out on a growing set of financial perks.

Currently companies are allowed to assess rewards or penalties that lead to a 20 percent differential in insurance premiums. And under the Affordable Care Act, scheduled for full implementation by 2014, that's slated to go up even more, to 30 percent.

That means we can expect even more health-related rewards and penalties in the workplace. It may take some of the deliciousness out of that pulled pork sandwich or croissant if you'll be paying even more for it later.

(Follow us @ReutersMoney or at ;

Editing by Jilian Mincer, Linda Stern and Steve Orlofsky)

((Linda.Stern@thomsonreuters.com; 202 898-8347; Jilian.Mincer@thomsonreuters.com; 646 223-8704))

Keywords: MONEYPACK BENEFITS/WELLNESS