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February 6, 2012

Experience, But At What Price? | Despite laws against age bias, health insurance costs weigh on some employers when they consider older job candidates

Westborough recruiter Audrey Brava recalls a time when she helped a client find a new employee, only to discover she had inadvertently given the firm an unpleasant surprise. The new worker had a much older spouse with some health issues.

“Their premiums rose tremendously,” Brava said.

For employers, the way health costs vary from worker to worker can be the elephant in the interview room. Health insurance is a major cost for many businesses, and, while discriminating against potential hires based on age or other factors that influence insurance costs is illegal, it can be hard for employers to put those factors completely out of their minds.

Brava, senior vice president of the health care division at Management Recruiters Inc., said she really hasn’t seen evidence of discrimination against older workers.

She actually thinks candidates she works with are often excessively worried that their age will work against them. With the economy pushing companies to be cautious about the expense of new hiring, she said, employers are most concerned about getting someone who can do the job extremely well regardless of age.

If anything, Brava said, employers may end up offsetting rising insurance premiums by reducing the percentage of the premiums they pay.

But Ultan Feighery, owner of HR outsourcing firm The Human Resources Organization in Westborough, said companies are often also concerned about the way an increase in premiums affects all their employees. In particular, small businesses can see big swings in their payments. Feighery said he has client companies with just a handful of employees, some much older than others. The young workers end up paying much more for their insurance than they would at an employer with a younger employee mix.

Moral Dilemma

Feighery said the issue can be a moral dilemma for employers.

“You’re not supposed to discriminate against people who are older, absolutely,” Feighery said. “Does everybody discriminate on (business) decisions? Absolutely, they do.”

He said it’s not just small employers that worry about the age issue.

“I know major companies who also watch their profile of ages for the same reason,” he said.

Russ Swallow of Worcester insurance brokerage firm BenefitsLab said he doesn’t see clients discriminating against older applicants, both because they could get sued and because the added cost isn’t usually large enough to make a huge difference in their balance sheets.

“Unless you get two or three [older workers] or a really small group, it’s not going to be ‘Wow, I can’t hire that person,’” Swallow said.

The calculations companies go through depend to a large extent on their size. For firms with fewer than 50 workers, premiums are based purely on employee demographics, Swallow said. For firms with 50 to 99 workers, underwriters have the discretion to offer credits to companies that don’t put in many claims.

“They’re walking around with maybe 15 percent in their pocket,” Swallow said.

At 100 or more employees, Swallow said, firms are rated on their track record for claims.

That difference helps explain why large employers are most likely to adopt wellness plans.

Wellness Programs

Todd McDonald of Worcester insurance brokerage Aisling Partners said small businesses can buy into wellness programs through the Massachusetts Connector, but he sees the product more as a marketing differentiator than as a really useful way to increase companies’ return on investment. McDonald said the biggest reason for small employers to look at wellness programs isn’t the direct financial benefit, but the corporate culture such benefits project. A potential hire who knows an employer has such a program may view the company as a good place to work.

“It also takes corporate courage,” he said.

When it comes to controlling insurance costs, Aisling said small companies’ best bet is to look deeply into insurance carriers’ offerings. Different insurers have different rules about how much a factor such as a new hire can increase premium costs, or whether Medicare-eligible employees must move off the employer’s plan.

Swallow said another tack employers sometimes take is to reward workers who get their insurance through their spouses. It’s illegal to ask about that in an interview, he said, but sometimes job applicants bring up the subject, and they may end up rewarded with a slightly elevated pay rate, thanks to the money the company saves in not having to cover the new worker.

In some cases, Swallow said, companies also offer existing workers extra money in their paychecks if they’re on a spouse’s plan.

“Is that evening it out, or is it paying me a bounty to stay on my spouse’s insurance?” Swallow said. “I don’t know.”

Sheldon Prenovtiz, president of Westborough benefits management firm Administrative Business Resources, said there are many things employers may look at in trying to keep their health insurance costs down, from changing the structure of the plans they offer to outright discrimination. But he said discrimination is probably fairly rare, and most employers are resigned to dealing with the costs of hiring older workers.

“It’s kind of, It is what it is, and there’s not a whole lot you can do about it,” he said. 

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