Health insurance may burn smokers

By Lisa Cornwell
Associated Press

CINCINNATI – Smokers already feeling pressure from increasing cigarette costs and workplace smoking bans are now feeling squeezed from another direction – health insurance premiums.
A growing number of employers – private and public – are charging employees who use tobacco more money for their health insurance coverage. Employers hope that the higher charges will motivate more employees to stop smoking, resulting in improved health and lower health care costs for the companies and their workers.
Meijer Inc., Gannett Co., American Financial Group Inc., PepsiCo Inc. and Northwest Airlines are among the companies already charging or planning to charge smokers higher premiums. The amounts range from about $20 to $50 a month.
“With health care costs increasing by double digits in the last few years, employers are desperate to rein in costs to themselves and their employees,” said Linda Cushman, senior health care strategist with Hewitt Associates, a human resources consulting and services firm.
She said the practice of smoker surcharges is becoming such a significant trend that this year, it will be part of Hewitt’s annual survey of companies’ current and future health care plans.
Cushman said a general benefits survey of 950 U.S.-based employers last year showed that at least 41 percent used some form of financial incentives or penalties in their health care plans.
She estimates that at least 8 percent to 10 percent of the businesses probably aimed some of the incentives or penalties at smokers and says that percentage is growing.
“With smokers costing companies about 25 percent more than non-smokers in the area of health care, it just makes good business sense,” she said.
In Indiana, it may take until July for employers to implement incentives for non-smokers.
Scott Tittle, special counsel and policy director on health issues at Gov. Mitch Daniels’ office, said that the state has a law that prevents employers from discriminating against smokers in hiring considerations, compensation and benefits. However, both Daniels and state lawmakers are pushing legislation that will allow employers to provide incentives to workers who do not smoke.
“The governor has a twofold goal,” Tittle said. “He wants to reduce the number of smokers in the state as well as reduce the cost of providing health insurance for employers. Nationwide, Indiana ranks seventh in terms of adult smoking rates.”
There are currently two live bills in the state legislature that address the issue of tobacco use and cost of health insurance. One has passed the House, and the other has been approved by the Senate, but both must be voted on by the opposite chamber. Tittle said that should be done by March 14.
“The measures have received overwhelming support so far,” Tittle said, adding he expects the bills to pass.
If approved, the law will go into effect July 1, allowing employers to implement financial incentives to reduce smoking among employees, which in turn will lower their cost of providing health insurance.
But Tittle was not able to provide an estimated financial benefit to employers.
A spokesman for Anthem Blue Cross and Blue Shield in Indiana was unable to say how employers would respond if the measures are approved.
“Honestly, we don’t know what impact it will have,” Tony Felts said last week. “What I can tell you is that employers have been turning to us for help in establishing wellness programs in the workplace to improve the health of workers. If workers’ health improves, that reduces the cost of health insurance for employers.”
One executive at a local company was not sure what the company would decide if the bill is passed.
“Unless we see exactly what benefits the employee or the company will get, it’s hard for me to say whether we will implement such a plan or whether we won’t,” said Darlene Whaley, vice president of human resources at Warsaw-based orthopedics firm Biomet Inc.
Elsewhere, the companies imposing the surcharges are mostly self-insured, with employers and employees sharing the insurance premium costs.
Other companies or insurance plans have offered workers financial rewards for exercising, dieting or other healthy behaviors. Some have started on-site fitness programs and are paying for gym memberships.
The Centers for Disease Control and Prevention estimates $92 billion in lost wages annually in the United States from smokers who die prematurely. In addition, the economic cost of smoking includes $75.5 billion per year in direct health care costs.
“In addition to employers having to pay out more in health care costs, public opinion is now solidly on the side of eliminating smoking, and workers are realizing increasingly that they are having to pay for others’ lifestyle choices,” said Helen Darling, president of the National Business Group on Health, a non-profit agency representing more than 200 of the nation’s large employers.
Gannett Co., the nation’s largest newspaper publisher, this year began charging employees who smoke an extra $50 a month for the company’s insurance coverage.
“We have some strong feelings that smoking is really bad for employees, and a healthier employee is better for us,” said Tara Connell, a spokeswoman for the McLean, Va.-based company.
PepsiCo Inc., based in Purchase, N.Y., has been charging employees who use tobacco $100 annually for a couple of years, and Grand Rapids, Mich.-based Meijer Inc. started charging smokers $25 a month this year. That fee is dropped if smokers complete a smoking-cessation program, Meijer spokeswoman Judith Clark said.
Cincinnati-based American Financial Group holding company and its subsidiaries waive the $37.92 monthly fee for a year if smokers make a good-faith effort and complete the company’s stop-smoking program, said Scott Beeken, a vice president with the Great American Insurance Group subsidiary. If the employee starts smoking, the fee would be reinstated the next year.
About 35 workers were expected to enroll if the voluntary program had not included the financial incentive, but 325 have signed up so far.
“The charge probably was a motivating factor,” Beeken said.
Public employers also are requiring smokers to pay for their habit.
The state of Alabama on Oct. 1 began charging $20 a month extra per employee insurance contract. The charge applies if anyone covered under a contract – such as a spouse – smokes. Georgia charges $40 a month for smokers covered under the state’s health plan. Employees caught lying on their insurance form about whether they smoke could lose their insurance for a year.
The state health plan kept having cost overruns because of rising costs and high use, said Georgia state Sen. Tommie Williams, R-Lyons.
“We know smokers cost more as far as health care goes,” said Gary Matthews, deputy administrator of the Alabama State Employees’ Insurance Board. “We are putting the burden on them to take responsibility for their own health.”
Employers say the surcharges are incentives rather than penalties, but that’s not the way many smokers see it.
“Where is it going to end?” asked Jim Clark, a smoker and owner of Strauss Tobacconist in Cincinnati. “Are they going to start saying you can’t wear a blue shirt on Monday or drive a green car on Thursday?”
Lewis Maltby, president of the National Workrights Institute, said that making smokers pay more for insurance and take more responsibility for their health choices is not inherently wrong, but he worries about the precedent the surcharges may set.
“They could be the first step down a very dangerous road,” Maltby said. “Do we really want to live in a world where employers penalize us for everything in our private lives that isn’t healthy?” he said.
Some employers have turned to even stronger measures to discourage smoking. Weyco Inc., an Okemos, Mich.-based medical benefits administrator, fires employees who smoke even if it is on their own time.
Jim Wendling, a 45-year-old employee for Cincinnati-based Kroger Co., recently acknowledged on Kroger’s health survey that he is a smoker. Even though Kroger doesn’t charge smokers more for insurance, he fears the survey may be the first step in that direction.
“I personally don’t think a company should tell employees what to do when they are not at work,” Wendling said.

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Charging premiums
Some private and public employers that require tobacco-using employees to pay more than non-smokers for their health insurance:
•American Financial Group Inc.
•Gannett Co.
•PepsiCo Inc.
•Meijer Inc.
•General Mills Inc.
•Western & Southern Financial Group
•Northwestern Mutual
•Blue Cross of Idaho
•Georgia
•Alabama
•West Virginia
•Kentucky