A new solution to the obesity crisis?

(FSB Magazine) -- Midwestern hospital operator Clarian Health caused a stir when it announced that next year employees who smoke will be assessed $5 per paycheck in extra insurance co-payments, and that in 2009 it will extend the penalty to workers with high cholesterol, blood pressure and blood glucose; obese employees will be charged $10 extra.

Final federal rules for such programs went into effect in July, giving employers firm legal footing to push workers into healthier lifestyles. Rex Materials, a $20-million-a-year maker of insulation in Fowlerville, Mich., has proved the programs work. In 2005 President David Rex offered to cut premium co-pays $10 a week, or about 20 percent, for workers on the PPO plan who undergo a health-risk assessment.Those who maintained a minimum rating or raised their scores closer to the cutoff by taking steps, such as quitting smoking or lowering blood pressure, kept the discount.

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In 2006, when the average small firm saw health premiums rise 8.8 percent, Rex had no increase. Sharon Cohen, health-care benefits counsel at Watson Wyatt Worldwide, says Rex's carrot beats Clarian's stick. "Positive reinforcement always works better," she says.