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. 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.

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20 responses to “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.

    • What about the obese person … isn’t that a life choice I am paying for? What you are saying is really unfair. People who are obese are also making a life choice and they are probably more likely to have more health problems than a social smoker. I personally no longer smoke (3+ years), but I don’t think charging smokers more money for insurance is the answer. What about people who consume alcohol ……. I am sure there are some employees who drink too much or may even be alcoholics. How should we fine them? How about junk food addicts. Lot’s of them too. People really are prejudice against smokers!

    • that’s fine to say that, but as a part of the insured group, I am paying for pregnancy of others. I don’t have children and no desire to have them, yet I pay into the group and allow others that health choice. Discrimination is not fair, period.

    • just want to say I am alot older and yes I smoke this just opens a can of worms because i only go to the doctor once a year I agree if your going to go after smokers, lets go after obese people, people that take insulin what about people with cancer that didn’t get it from smoking this is a form of discrimination , I have the right to choose these obese people had the right to not eat as much, just another form of dictatorship, We could be like the billions that don’t have health care and use the system but I was brought up with values that you work for what you want. I the last time I remember I live in a free country the insurance companies are no different then the life insurance company their making money or they wouldn’t be in business, If these companies are paying so much for health care for their employees maybe they should look into something cheaper. for what the insurance you get 80/20 and you have to meet a deductible before they will pay 100% I would just as soon pay cash for my visits when and if I have to use the service then not use my insurance and get penalized because I choose to smoke let’s go after the people that drink do drugs I could go on and on this is pathetic that companies have come to this I am sure their are bigger fish to fry. As I said the insurance companies are making money or they would not still be in business.

  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.

  6. I really don’t see how, legally, they can discriminate against smokers and the obese. There are other habits and hobbies that pose health problems. Besides smoking and obesity, we can include excessive tanning, eating too much red meat, being sedentary, drinking too much, drug addiction, climbing mountains, sky diving, etc, etc, etc,. Has this been litigated in the courts? Unless this is stopped, it can really get punitive. And, no, I do not smoke.

  7. I thino it’s unfair and legally people rights are being stepped bout they stop selling cigarettes all together…but that’s too much like right..all this crap is a money maker..u put the product out there knowing it causes health issues But take from people who chooses to’s not really hurting no one except the person who smokes…and people die from lung cancer and never smoked in their lives…so what about alcohol…drunk’s crazy and I don’t agree with it..

  8. It is sad that our county has come to all of this crazy stuff. With the crap about having to have insurance or you get penalized at the end of the year. I could not get any help on my daughters insurance due to now they calculate how much her stepdad makes but they won’t take in consideration that he pays $1200 a month on 3 kids of his own. And now we have learned that because he smokes he will be paying another $50 to $100 extra for his own health insurance every two weeks. This country is going to hell in a hand basket…………

  9. Just a thought, smokers are more likely prone to getting sick, than a non-smoke. The reason for this may not be that the smoker is prone to getting sick more often, but the smoke is required to go outside in the elements of weather to smoke, making them more prone to getting sick more often than a non-smoker. Furthermore, the employer wants to charge the employee more for health care because the smoker is prone to getting sick more often. My point is, that the employer is causing the smoker to get sick more often than non-smokers.

  10. What about Joe with high blood pressure- who consistantly eats salty chips every break period?? What about Sally with diabetes- she sees a donut and 3 pops everyday while at work?? Are they gonna pay extra?? This is totally discrimination!!!!!!! And wake up people!! If we allow the insurance companies to charge a smoking charge then what is next?? I thought I had civil liberties here in the USA!!! Every thing in moderation!!! IS THE KEY TO HAPPINESS!!

  11. I see why they do charge more but, I havent had a cigarette in over 5 yrs. I do however vape and they want to charge me $100 extra for health insurance. Nicotine is no more harmful than caffiene so lets charge coffee drinkers, pop drinkers, tea drinkers and any other caffinated beverage drinkers extra too.

  12. Ditto to what Margaret said. You could pick on all kinds of different ‘groups’ of people that pose extra risk. The list could potentially be endless. By making select folks pay extra cost goes against what Insurance is setup to be.

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