Can Companies Charge Smokers More for Health Insurance?

Probably, but they should consult their legal teams first.

CVS made headlines recently with its decision to stop selling cigarettes and other tobacco products. The company will lose $2 billion in annual sales, but it plans to make some of that money back through smoking cessation programs and other means.


Photo courtesy of Flickr user Fried Dough

There are also companies hoping to save money on health care by incentivizing their employees to quit smoking (or never to start). Businesses have a lot to gain by pushing employees to quit smoking, according to a recent rundown on the topic by law firm Fisher & Phillips. Employers pay nearly $6,000 more per year in absenteeism, lost productivity, smoke breaks and health-care costs for each worker who smokes cigarettes, according to a recent Ohio State University study. But introducing anti-smoking incentives could also be a legal minefield, especially for smaller companies with modest legal teams.

The Patient Protection and Affordable Care Act (ACA) allows employers and insurers to give incentives to workers who are non-smokers, in particular insurance premium reductions. But there’s a lot to consider, including the Health Insurance Portability and Accountability Act (HIPAA), the Employee Retirement Income Security Act (ERISA) and state laws.

Fisher & Phillips suggests that employers who charge smokers more for health-insurance premiums do the following: give workers the chance to qualify for the non-smoker reward at least once a year; provide smoking cessation programs so all employees have a chance at the incentive; decide whether occasional tobacco use or e-cigarette smoking is permitted; and figure out how to discipline employees who lie about their smoker status to get the incentive.

It sounds like employers need to tread carefully here. They should talk to their legal departments about what to do if an employee starts smoking again in the middle of the year. They should also figure out how much authority they have to police their employees.

For instance, if a “non-smoker” employee steps outside for a cigarette during a post-work happy hour, are his coworkers responsible for reporting him to human resources for stealing from the company? Does the company have a right to rescind the incentive if someone sees a “non-smoker” employee taking a drag outside a coffee shop over the weekend? These are only some of the questions a company should answer before it rewards its non-smoker employees with cheaper health-care premiums.

8 thoughts on “Can Companies Charge Smokers More for Health Insurance?

    • My understanding is the answer is “yes,” companies can discriminate. If you want plenty of legal justification see Action on Smoking and Health, which has been around ~40 years and knows this issue inside and out:

  1. Safeway is very successful with their approach where employees can get lower health care costs if they slim down, quit smoking, etc. They review the criteria periodically.

  2. I’d be careful with those incentives that pose some time limits that get folks into: “I saw Suzie smoking over at the diner” sort of tattle.

    That’s not what you should get entrenched with now.

    Structure the incentive so it esteems the person for simply risking a try.

    It can cost several tries to quit smoking those cigarettes.

    And by all means: test out new creative programs that provide smokers fresh ways to quit.

    Humbler Acts
    Creator of “The Wizard’s Outrageous Scheme For Stopping Smoking”

  3. Executive Order #1: Increase premiums 18% for smokers.
    Executive Order #2: Increase premiums 15% for those classified as obese.
    Executive Order #3: Increase premiums 12% those who don’t exercise.
    Executive Order # 4: Increase premiums 8% for those who don’t eat broccoli.

    Death Panel Decision #1: Smokers will not be reimbursed for pulmonary care.
    Death Panel Decision #2: The obese will not be reimbursed for coronary care.
    Death Panel Decision #3: The sedentary will not be reimbursed for hip replacements.
    Death Panel Decision #4: Those who don’t eat broccoli will not be reimbursed for cancer treatment.

    We are losing the pricing and allocation advantages of the free market, and we
    are losing our freedom to live our lives as we please.

  4. Let’s stick to the facts, not the drama. You still, and always will, have the freedom to live your life as you please. However, you will no longer have the “freedom/priviledge” to have others [your employer and/or individuals, such as those who do their part to stay healthy, use less health care, and/or (per the research) cost less to the health care system] pay for your (unhealthy) lifesyle choices. Your choice…you’re an adult, absolutely, live as you please. Then, be accountable enough to pay accordingly.

  5. The Affordable Care Act contains several measures that will increase efforts to help those who smoke quit. These measures include expanding Medicare coverage for tobacco cessation; requiring cessation coverage for pregnant women in Medicaid; and requirements for new private plans to cover tobacco cessation interventions. At the same time it’s disappointing to see that tobacco users can be charged higher premiums. Smoking is highly addictive and often preys on the most vulnerable populations including the poor, minorities and the least educated. Additionally, quitting is not easy – on average it takes 11 quit attempts before smokers can quit successfully. At Legacy we believe that access to comprehensive cessation services is essential and should be provided to all smokers as part of their health insurance coverage – without co-pays, deductibles and variable premium rates. Further, before higher premiums are charged, insurers should make comprehensive cessation programs available to those who need them – a decision that will both save lives and money.


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