Minimizing the Impact of Smokers on Your Healthcare Costs
Recently, more employers are taking an active role in controlling healthcare costs related to the smokers in their workforce. According to the Centers for Disease Control and Prevention, employees that smoke have been known to cost their companies an estimated $167 billion each year in direct medical costs and lost productivity due to morbidity. North Carolina Prevention Partners estimate that NC employers sustain an average excess of $1,429 per smoker per year in increased healthcare costs alone. These figures have led many employers to enact more direct measures rather than just enforcing a smoke-free workplace.
Nationally, many employers have moved into a role of penalizing smokers in their workforce by charging them additional fees for healthcare coverage. In these cases, an employee who smokes would have to pay a premium surcharge for the company to cover the employee and/or any dependent who smokes. In some states, employers can even test prospective employees for tobacco usage and use the information as a determiner in the hiring process.
But while these trends continue to grow across the nation, employers in North Carolina will find it difficult to implement such measures due to current state laws. The Lawful Products Law, or what is sometimes referred to as the Smoker Protection Law (NC Gen Stat § 95-28.2), prohibits employers from discriminating against employees who engage in “lawful products” if the activity occurs off premise and during non-work hours. This statute contains a provision that allows employers to charge higher health insurance rates based on the use (or non-use) of lawful products if the employer:
1. Can “actuarially justify” the higher premium costs
2. Provides written notice to the employees in question
3. Contributes an equal amount to the insurance carrier on behalf each employee
Unfortunately, since most insurance carriers providing group health plans do not break down their rates based on smokers vs. non-smokers, North Carolina employers would have a difficult time complying with this section of the statute.
Therefore, more North Carolina companies have begun engaging their employees in smoking cessation initiatives through wellness programs. Through these programs, employers can offer reimbursement on smoking cessation / nicotine replacement medications, onsite or online counseling, or even financial incentives to quit smoking. Such programs also offer a significant return on investment for many companies.
While a recent study by the Society for Human Resource Management reflects the popularity of smoking cessation initiatives (51% of surveyed employers say they currently offer such programs), employers are always finding more ways to minimize the financial impact of their smoking population. One thing is clear: employers now have options – and they no longer have to sit back and watch their employees smoke away their healthcare costs.
If you would like more information on smoking cessation programs or the legal aspects of employer anti-smoking initiatives, please contact our office at 919-403-1986. For further information on this issue, please click on the links below:
Spouses, Smokers Earning Penalties
Should Smokers Pay a Surcharge?
NC DOL Regulations (Lawful Products Law)
Questions or comments about this article? Email us at comments@hcwbenefits.com.
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October 26, 2007
Hill, Chesson & Woody strives to keep our clients' group decision makers abreast of trends influencing the employee benefits market. Look for Eyes on Benefits to bring you news and information affecting you and your employees.
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Chapel Hill, NC 27517
Phone: 919.403.1986
Fax: 919.913.0237
www.hcwbenefits.com