Increasing Benefits Costs to At-Risk Employees

March 14, 2007 · Filed Under For the love of HR 

A recent trend in benefits is to pass some of the increasing costs of medical insurance to at risk employees. One of the easiest assailed groups are smokers. Not only are they easily identified but they are not faultless in their affliction (like some cases of obesity or cancer with genetic predispositions). The second reason is that smoking is verifiably expensive. A recent study cited the figure of 6-8% of total medical costs in the US is attributable to smoking and nearly one in five deaths can also be traced back to that cause. While 6-8% may sound like chump change, health care costs in the US comprise of 16% of our GDP. Or nearly two trillion dollars.

While workplace bans on smoking while at work isn’t uncommon in the new century, stricter methods have been put into place. In 2005, there was a well publicized case about an employer banning smoking outright as a condition of employment. And it is becoming more of a common practice to charge smokers more for health care coverage than their non-smoking colleagues.

This trend has outraged some rights groups while gaining applause from health groups and insurance companies. On one side, it is unfair to dictate what your employees do outside of work. Not only that, but there are greater risk factors where employers will not penalize an employee. For example, alcoholism may go untreated for years and may do damage far beyond that of moderate to light cigarette usage. On the other hand, employers want to find ways to decrease costs and maintain profitability. Discrimination on the basis of smoking is not against the law so employers are free to do as they please in this arena. And this sort of discrimination isn’t uncommon anymore. As an example, companies routinely give health care discounts to employees who participate in their wellness programs and discriminate against those who don’t participate.

Where do you come down on the issue? There are obviously very polar positions on the issue but there is definitely some middle ground. I’d like to hear your take on it before I post my next post in which I will go into my views in great detail.


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Comments

9 Responses to “Increasing Benefits Costs to At-Risk Employees”

  1. Ann N on March 15th, 2007 3:47 am

    The smoking issue seems simple and logical on it’s face, but even your description of not being “faultless” in their affliction shows the opportunity for bias - “like some cases of obesity or cancer with genetic predispositions”. Who will judge who is more or less at fault for being fat? Who is NOT faultless for getting cancer? Lung cancer for a smoker ok — will be blame the lung cancer from second hand smoke for an employee who used to work in a bar, or who is married to a smoker? The path gets quite slippery.

    There’s many reasons why health-care costs are skyrocketing — only a minor few of them are the “fault” of the consumer’s behavioral health habits.

    [Reply]

  2. Your HR Guy on March 15th, 2007 7:43 am

    There are very few instances that I can think of where prolonged exposure to cigarette smoke cannot be avoided. And assuming we are only talking about active smokers, the two examples you give wouldn’t apply to increasing premiums of having their jobs in jeopardy.

    [Reply]

  3. Lori J on March 15th, 2007 8:16 am

    I am the main subcscriber on our healthcare insurance. I do not smoke, but my husband does. How would that work in regards to my employer knowing about my husband and charging me more? I certainly will not volunteer the information if not asked outright.

    [Reply]

  4. Jacqueline on March 15th, 2007 12:04 pm

    The way we determine auto insurance is based on risk, so why not apply that to health insurance? People who choose to drive fast sports cars are charged more than other drivers. Auto insurance companies have found that these drivers are more at risk for traffic violations and accidents. Similarly, it has been proven that making the choice to smoke increases a person’s risk of developing health-related problems.

    On the other hand, smoking is an addiction and driving a fast car is not. I took a class on psychopharmacology in my undergrad where my professor told us that nictotine is more addictive than any other substance. So for some people, what was once a choice is now something out of their control. On that note, maybe companies should charge smokers more for health benefits but also offer to drop those additional charges if the smoker participates in a “Quit Smoking” program paid for by the employer - and actually ends up quitting after a specified time period.

    I do worry that policies like this one on smoking could open the flood gates in terms of companies regulating too much of an employee’s outside lifestyle.

    [Reply]

  5. Your HR Guy on March 15th, 2007 8:05 pm

    Lori: I don’t know how that works as I don’t have a workplace that penalizes smokers.

    Jacqueline: Good points all around!

    [Reply]

  6. vanessa on March 16th, 2007 7:15 am

    My company pays a certain dollar amount towards insurance premimuns. Employees pay anything above that. For companies to limit benefits based upon a behavior that may or may not impack an employee’s work is far too intrusive. It is easier for a company to deligate its responsiblity than take progressive action but it is not always the best avenue. If an employee is missing too much work due to a behavior then that has to be addressed no matter what causes the behavior. If my company made a non-smoking rule then the best employees would be gone and then where would the company be?

    [Reply]

  7. Diane Pfadenhauer, The HR Lawyer on March 20th, 2007 5:21 pm

    Hey HR Guy, - Here in NY we have a section of the NY Labor Law which prohibits employers from taking adverse action against employees who engage in lawful activities outside of work - it is actually dubbed the “smoker’s rights law” - There are some companies (out of NY) that have gone so far as refusing to hire smokers. Obviously an interesting debate. I’ve had a few posts on my blog - http://www.strategichrlawyer.com regarding this issue. Diane

    [Reply]

  8. YourHRGuy.com » Blog Archive » Increasing Benefits Cost is Just a Band-Aid on March 26th, 2007 8:26 pm

    [...] week, I wrote about employers passing on benefits cost to at-risk employees (specifically smokers but could be broadened). I received a lot of great [...]

  9. robert edward cenek, RODP on April 8th, 2007 1:09 pm

    Comments below taken from my blog - Cenek Report

    Railing against the evils of nicotine addiction is in vogue - and there’s little risk of being ostracized in public for doing so. After all, few quibble with the notion that smoking is an unglamorous vice, an outright public health calamity.

    Business and government have joined the fray, eliminating smoking in the workplace, and sending most Hack Raspkoffs into the parking lots or smoking kiosks. Some firms discriminate against smokers in hiring; others charge extra for health insurance.

    Smokers should pay more for insurance – but so should sunbathers, boozers and rotund men and women who spent more time working out at the training table than at the gym. Our society probably needs an equivalent of the fake cough for the buffet line.

    More than half of Americans are overweight. Researchers say this obesity epidemic poses a major threat to public health due to the clear connection between obesity and type 2 diabetes, heart disease, and cancer. Obese or overweight people paid more in health care costs than those of normal weight. In 1998, overweight and obese individuals paid an average of 11.4% and 26.1% more on out-of-pocket medical costs.

    More organizations need to turn up the dial in focusing on health in a more wholistic manner, and to widen their focus on encouraging employees to adopt a healthier lifestyle. Smoking is bad; but so are a host of other lifestyle habits that seem to go unnoticed or unchallenged.

    robert edward cenek, RODP
    http://www.cenekreport.com

    [Reply]

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