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Overweight adults pay a ‘fat tax’

/ Source: CNBC

Putting on extra pounds can come at a hefty price where your finances are concerned. Individuals who are overweight incur greater medical costs; higher life insurance premiums and studies show they may even receive lower-than-average salaries.

THE SPAT OVER FAT at Southwest Airlines gained worldwide media attention last year after two passengers considered suing the airline when they were asked to purchase two extra seats on a flight last summer because of their weight.

“I said, ‘Why?’ and she said because they were overbooked,” said Andrea McLaughlin, one of the passengers.

Southwest eventually gave the passengers a partial refund on their roundtrip tickets. Yet for the nearly two-thirds of Americans who are overweight or obese, carrying extra pounds can come at a much bigger price.

“Obesity is associated with lots of chronic diseases including diabetes, cancer, sleep apnea, and osteoarthritis,” said Eric Finkelstein, a researcher at RTI International in Research Triangle Park, N.C.

And medical costs associated with treating these diseases are very high.

“They spend $700 more per year than normal Americans,” said Finkelstein. “And when you total the overweight and obese population, you’re looking at approximately $93 billion greater annual expenditures.”

The bulk of those expenses are passed on to all Americans in the form of Medicare and Medicaid and contributions to their employer’s group medical plan. But overweight Americans who are self-employed often suffer those health care costs alone.

“If you’re applying for individual health insurance, the weight situation may become critical,” said Bill Simons at the Rust Insurance Agency, in Washington, D.C. “And it may increase your premium significantly and may even eliminate you from being able to purchase coverage.”

The larger your size, the more likely your life insurance premiums will also soar.

“It could easily be double, triple or up to five times the normal premium,” said Simons, even if you’re overweight and otherwise perfectly healthy.

At State Farm Insurance, for example, a whole life policy for a 35-year-old male, non-smoker, 5-feet, 10-inches tall, can have an ideal body weight of to 251 pounds without paying an extra premium. But tipping the scale at 252 pounds, would cost him a kind of “fat tax” — an extra premium of $2.65 for every one-thousand dollars of coverage. That’s about 18 percent more than normal.

“Eventually, you could reach the point where you’re declined because you’re so far overweight no one is going to insure you,” said Simons.

That’s even more likely when it comes to disability insurance, since the odds of becoming disabled are much higher for the overweight. And the obese often have smaller incomes — which leaves less money to pay those bills.

“People assume that the reason that fat people are poor and thin people are rich is because when you’re poor, you can’t afford health clubs or you eat food that’s high in calories because that food is cheaper,” said Esther Rothblum a psychology professor at the University of Vermont. “Our research shows the opposite direction. That is, first you are fat. And because you are fat, you don’t get into elite colleges, you don’t get good jobs, you don’t get promoted.”

And as a result, obese people often don’t earn a good income, making the so-called “fat tax” an even greater burden.

If you already have life insurance, adding pounds later in life may not cost you as much since insurance premiums are usually guaranteed when you buy the policy. And at least one insurer is making it easier for overweight, older Americans, ages 75 to 81, to get life insurance. The Hartford Financial Services Group is actually adding pounds to its weight limits for older life insurance applicants.