This J&J/Goetzel/Vitality proposal is a Fat Tax, pure and simple. If they are right about shareholders caring how many overweight people a company employs (and they aren’t), it is a tax on overweight employees, each one costing the company a slight amount of its market value. If they are wrong, this represents a pure transfer of wealth from corporate America and their employees to companies like Johnson & Johnson and Vitality.
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By the way, these wellness people don’t understand math any more than they understand wellness. One of their premises for the Fat Tax is that over 14 years, companies with wellness programs outperformed the market. Besides failing to use sector indexes as benchmarks, they don’t understand the way compounding works. Suppose the average market performance is set to 0%. If all your stocks perform at a market level, your return will be 0%. However, if half of them increase 10% a year and the other half decrease 10% a year, you’ll be way ahead of the averages because each year the 10% increases are applied to an increasingly larger figure, and the 10% decreases are applied to an increasing smaller figure. And if you look at their portfolio, it’s disproportionately weighted to the healthcare sector, which boomed over the period, and the financial services sector, which dramatically contracted. Towards the end of the period, the performance of Citigroup etc. didn’t matter any more.
This is true even if you set the market performance to a figure other than 0%. It’s just clearer this way.