THE BLOG
01/27/2016 05:18 pm ET Updated Jan 27, 2017

Johnson & Johnson Proposes a "Fat Tax" On Businesses

Monkey Business Images/Stockbroker via Getty Images

If today were April 1st, you'd think what you are about to read was completely made up. Unfortunately quite the opposite is true.

At last week's Davos conference, Johnson & Johnson (J&J) proposed a $150/employee "Fat Tax" on publicly traded companies and presumably companies planning to go public. They were joined in this by other companies with an interest in pushing wellness services, such as The Vitality Group (an affiliate of Humana) and a few other companies (IBM and Pepsico) and rogue researchers from Harvard and Johns Hopkins. (Neither university officially supports this scheme.)

Here's how the Fat Tax would work. As part of required disclosures to shareholders, you would be required to pay a wellness vendor -- such as, coincidentally, Johnson & Johnson or Vitality -- around $50 each to screen employees and spouses. You'd have to pull employees off the job for an hour too, to get this screening. All in, we estimate the Fat Tax at about $150/employee, including that hour of lost productivity. (You can substitute your own estimates, of course.)

J&J's idea would be that shareholders would prefer thin employees. Or at the least, shareholders would prefer a robust wellness program to make employees thinner.

The Alleged Benefits of the Johnson & Johnson Fat Tax

The benefits to Johnson & Johnson and Vitality are quite clear -- you would pay them money to screen your employees. However, no one else benefits. Companies that hire vendors to "do wellness" to their employees lose money on these programs. On that point, there is universal agreement. The New York Times' economists, the nonprofit RAND Corporation and even the wellness industry trade association itself agree on this point.

Most ironically, the Vitality Group's own wellness program failed on its own employees. They got 2 percent more overweight last year. How can you trust these people to "do wellness" on your employees if they can't do it on their own?

It's also been proven that there is no correlation between employee weight and a company's financial success, and that corporate weight loss programs don't generate weight loss at all, even if you pay your employees to lose weight.

And, most importantly, having comprehensive, intrusive, and expensive wellness programs negatively impacts stock prices, meaning the idea that shareholders benefit is absurd. So essentially this Fat Tax has no benefits. Now let's review the costs.

The Costs of the Johnson & Johnson Fat Tax

Consider the human costs -- the horribly discriminatory, ostracizing, demoralizing effect of lining up employees to be weighed and screened and telling them it's because shareholders want to know how fat they are. Johnson & Johnson calls itself a "wellness" company but it is hard to see how this program would improve anyone's well-being. The human costs are covered in this Huffpost article.

The logistics of complying with the Fat Tax would be overwhelming. To begin with, companies would have to cajole their employees and their spouses into submitting to screenings for cholesterol and blood glucose, on company time. Participation in these screenings is already low today despite incentives/penalties averaging $693. How much more can you pay or fine your employees to submit? What participation rates would be required to satisfy this regulation? Can companies force employees to do this under the Americans with Disabilities Act?

Even the logistics of measurement would be overwhelming. For instance, Vitality Group itself claimed a "cumulative" reduction of 210 inches in waist circumference while simultaneously admitting that its average employee Body Mass Index (BMI) climbed. Which of those two should investors care most about, if they move in opposite directions? If a wellness vendor can't figure this out for their own employees, how can you be expected to figure it out for yours? It's most likely that Vitality simply doesn't know how to do the math, since BMI and waist circumference should correlate closely. Bungling simple arithmetic is a hallmark of the wellness industry.

And it's not just weight they want to force you to disclose as part of the Fat Tax. They're also demanding disclosure of your employees' cholesterol and other blood values. Most curiously, they want you to measure and disclose your employees' stress. No idea how this would happen. The one wellness vendor that tried to measure stress failed miserably--and, this being the wellness industry--hilariously.

Status of the Fat Tax

The bad news is that federal government is already taking the first step towards endorsing this Fat Tax by allowing companies to require employees to hand over genetic information as part of wellness programs. The good news is that --until Thursday at 5:00 -- it is possible to tell the government what you think of this idea. And your friends who own businesses (or who would be targeted by this scheme owing to their weight) should do the same.

You might also suggest in those comments that if the wellness industry wants to regulate us by imposing a Fat Tax, they should be regulated too. Uniquely in healthcare, this industry has no requirements for training, education or basic clinical knowledge. There is no government oversight at all, and no wellness vendor has ever been prosecuted for anything. Quite the contrary, they are not only allowed to lie, but the biggest liars get the biggest industry awards. It is also perfectly legal for wellness vendors to harm employees by screening the stuffing out of them, flouting all accepted clinical guidelines.

So let them get their own house in order before driving up our costs, alienating our employees, and complicating our disclosure requirements, all simply to make a few bucks.