Workplace Issues

Can Companies Charge Smokers More for Health Insurance?

Probably, but they should consult their legal teams first.
Marielle SegarraFebruary 11, 2014

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.

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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. If you have never tried vaping before, now is the perfect time to give it a go. A lot of people are switching to vaping because they can save money on their insurance premiums by doing so. Check out this blog post for more information about how you can lower your insurance costs by going with cheap vaping deals .The vaping industry has exploded in popularity and now there are a lot of options for those who want to enjoy the benefits of e-cigarettes.

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.