T. is an office manager at a small, profitable company that offers a pension fund for all its employees. The executive wanted to set up pension deposits for T. as well, so T. was put in contact with the company’s insurance agent, who asked her to fill out the paperwork.
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The company offers its pensions through the Makefet pension fund, which is managed by Migdal Insurance. The paperwork includes a medical questionnaire, asking potential customers to state whether they use drugs, have heart problems or take psychiatric medication, among others. It also asks for the customer’s height and weight.
T. filled out the paperwork, only to have the Migdal computer system tell her that she wasn’t eligible to sign up for the company’s pension fund. She pushed, and the company told her in response, “We can’t approve your membership due to your medical state.” What medical state, exactly? “Morbid obesity.”
The BMI scale
Migdal uses as its means for judging weight the BMI scale, which is based on the ratio of height to weight. A healthy BMI is considered to be in the range of 18.5 to 25. Those with a BMI above 40 are considered morbidly obese. With a weight of 115 kilograms and a height of 1.55 meters, T. has a BMI of 48. However, aside from her weight, she has no known health problems.
Pension funds ensure their members a monthly pension payment upon retirement or in cases of disability, and also pay a stipend to survivors should the insured member die. They get their money from monthly payments by workers and their employers. Legally speaking, a pension fund is a collection of assets held in trust by the managing company on behalf of members, with an element of mutual responsibility.
Pension savers receive a tax exemption on their deposits, up to a certain ceiling. The big benefit offered by pension funds is that 30% of assets are invested in special government-issued bonds. These bonds are inflation-linked and can have returns as high as 4.86%, more than three times the returns of standard government-issued inflation-linked bonds.
The Finance Ministry permits pension funds not to accept sick members, due to the mutual responsibility aspect – if one pension fund member falls ill and stops working, then he begins receiving monthly pension payments due to lost ability to work and stops depositing money into the fund. The healthy members fund this. If too many members fall ill, the pension fund may find itself short on money, and would have to cut the benefits paid to other members.
Meanwhile, according to Health Ministry data, some 15.7% of Israelis are considered obese – defined as a BMI of over 30. This is considered a risk factor for various illnesses. Another 34% are considered overweight – having a BMI of 25 to 30. About 1% of Israelis have a BMI of 40 or more.
Ran Melamed, VP of the legal rights organization Yadid, was the first to publicize T.’s story. “To the best of my knowledge, being overweight can have risks,” he notes. “Many people live for years with excess weight. Is this a reason not to let them have a pension fund? I came to the Finance Ministry with these questions. Five months later, following no small number of correspondences, phone calls and meetings, I still haven’t received an answer.”
The ministry ultimately told him that the pension funds base their medical standards on accepted international norms – those used by secondary insurance companies, which are international giants that insure insurance companies. The ministry noted in its response that it’s in the pension funds’ interest to accept members, since they profit from charging members management fees.
“’Those who lose out if the funds accept ‘unhealthy members’ are the other pension fund members,’” Melamed cited the ministry as saying to him. “In my opinion, the Finance Ministry is saying it’s protecting thin savers from the losses caused by fat savers.”
A senior executive in the pension sector told TheMarker that unusually obese potential customers are given the option of signing up for a complimentary pension fund. These funds are identical to pension funds, except they don’t have the government-granted benefit of being invested in special, high-interest government bonds.
The question of whether the sickly – and the obese – should be excluded from pension funds is not just an economic one, but also a moral one. It centers on the nature of mutual responsibility. It also raises the question of whether an Israeli citizen – even a sick one – should be excluded from a government-funded pension benefit, in the form of high-interest bonds.
Migdal stated in response: “Potential customers go through a medical screening process. In cases where the person is deemed to have a significantly larger chance of having an insurance incident (disability or death), his membership in the fund may be made under limiting conditions. In some cases, memberships are rejected.
“Migdal accepts members who are overweight, but is forced to reject potential members who are extremely overweight, a condition often likely to lead to illness and other complications. Thus Migdal is acting with responsibility and in keeping with the law, while maintaining its responsibility toward the other fund members and limiting their exposure to damage. Disability payments and survivors’ stipends are paid from members’ assets, and not at the managing company’s expense.”
The Finance Ministry did not respond.