Issue: More employers are increasing health premiums for smokers as a way to cut health costs.
Benefit/risk: Smoker surcharges can trim costs, but implementation mistakes can alienate employees and hurt morale.
Action: Use the following tips to design smoker surcharges that reduce the most costs with the least employee backlash.
For decades, employers quietly tolerated the fact that employees who smoke cost more in health care costs, about 25 percent more than nonsmokers. But with health premiums reaching the boiling point, that patience has worn out.
A small fraction of U.S. employers refuse to hire smokers, but that can be legally risky. Instead, many more employers have begun charging employees higher health premiums if they use tobacco. Forty-one percent of employer health plans now include some kind of incentive or penalty for smokers, according to a Hewitt Associates survey.
Hewitt estimates that about 10 percent of employers apply surcharges on smokers' premiums, typically in the $20 to $50 a month range. Examples: Gannett Co. charges smokers an extra $50 a month, and PepsiCo charges $100 extra annually.
Smoker-surcharge programs come in many varieties, such as:
- Surcharge imposed with no incentives to quit smoking.
- Employee option to enter a smoking-cessation program or pay the surcharge.
- Surcharge coupled with a discount for nonsmokers.
- Higher surcharge for salaried workers and a lower one for production employees.
What's the best practice? Introduce the surcharge as part of an overall wellness or health-risk assessment program.
"Make smokers feel like they aren't targets and you have their best interests at heart," says Watson Wyatt health care consultant David Beech. "Give them a chance to stop smoking before they have to pay more."
Example: Beech recently developed such an approach for a company. The firm announced last year that it would offer smoking-cessation counseling starting in January 2007, then implement a to-be-determined surcharge in January 2008. Smokers who complete a cessation program will receive a monthly credit on their premiums. The program will be offered as part of an overall health-risk assessment program that includes incentives for employees to lose weight.
4 tips for a successful program
1. Don't impose a surcharge by itself with little warning. That will only anger employees and hurt morale.
2. Avoid tiered surcharges, which charge certain employees (based on pay grade or position) more for their tobacco use. That sends a mixed message about the impact of smokers on health care costs.
3. Communicate surcharge programs in various mediums, such as memos, e-mail, company newsletters and your Intranet. Focus on the positive aspect of surcharges: They help control premium levels for nonsmokers.
4. Don't fire employees who smoke. Nearly 30 states protect employees from being fired or discriminated against because of their use of "lawful products outside of the workplace," which would include tobacco.
Even if you aren't in one of those states, firing (or refusing to hire) smokers may spark a legal claim. It's only a matter of time before an employee claims that smoker-firing policies violate the ADA.
According to Jonathan Landesman, an employment law attorney with Cohen, Seglias, Pallas, Greenhall & Furman in Philadelphia, "The suit could charge that, by firing a smoker, an employer is essentially regarding that person as one who is disabled or developing a disabling condition like cancer."
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