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Sunday, May 10, 2009

Should We Penalize Employees For Smoking?

When we talk about employee-related smoking, one of the first things we need to consider is performance-related costs.

Frequent smoke breaks are a major issue when it comes to employee performance and productivity. Employees who leave their desks several times throughout the day to take smoking breaks are clearly less productive than those who do not. Smokers are also absent from work considerably more than non-smokers. This becomes a major issue when employers have salaried employees who smoke.

Medical-related costs

Annual health care costs for smokers are 31 percent higher on average than the costs for non-smokers. A recent study from the American Cancer Society revealed that smokers had more hospital admissions per 1,000 (124 vs.76), had a longer average length of stay (6.47 vs. 5.03 days) and made six more visits to health care facilities per-year when compared to non-smokers (2).

Smokers add approximately seven percent to the total cost of healthcare for group health plan beneficiaries (2). Both employers and non-smoking employees absorb these added costs in the form of higher premiums.

What companies are doing: Companies throughout the United States are addressing this issue in several different ways. Many are either refusing to hire employees who smoke or are maintaining an unspoken preference for hiring non-smokers.Some companies take their preference for non-smokers even further by penalizing smokers financially. A client's HR Assistant recently read in a post on an HR forum that an Indiana company is docking the paycheck of each employee who smokes by $5 per-week until they quit. From a legal standpoint, this practice is highly questionable. However, it is legal for employers to charge a "tobacco use fee"-a health plan add-on that punishes employees for smoking.

Other companies are adding smoke cessation programs as employee benefits. According to the Center for Disease Control and Prevention, "paying for tobacco use cessation treatments is the single most cost-effective health insurance benefit for adults that can be provided to employees."

Comprehensive smoke cessation programs run on average about $0.50 per member per month (PMPM). For an employer sponsored health benefit program, the total average annual claim savings per smoker who quits is $192 (3). An October 2007 National Business Group on Health (NBGH) survey of 506 employers revealed that 74% believe smoking cessation benefits can decrease health care costs. Despite this, only 2% of companies offer a comprehensive scientifically-based smoking cessation program as an employee benefit (3).

Smoke cessation and small-to-mid-size firms: Many small-to-mid-size employers are reluctant to offer smoking cessation benefits due to the up-front costs they will incur, despite the high likelihood that these benefits will yield a positive return on investment (ROI). Authors of a case study on The Pacific Business Group on Health (PBGH) reported that smoking cessation programs should return an estimated 1/3 of costs to employers in the first year and to break even by the third year. Everything beyond the third year is positive ROI (4).

But, given the current economy, will employers even think of cost savings three years in advance? And what goes into an effective smoking cessation program?

The 2000 Public Health Service guideline indicated that a combination of pharmacotherapy and behavioral counseling is the most effective way to treat nicotine addiction. The authors of the PBGH case study further recommend that employers offering smoking cessation plans provide access to both prescription medications and over-the-counter (OTC) medications in order to expand treatment options. They also recommend that employers eliminate employee out-of-pocket costs for smoking cessation drugs and therapies in order to increase program participation rates (4).

However, insurance companies do not cover OTC medications, so employers offering them as part of a smoking cessation benefit are left to foot the bill. Many employers cannot afford this added cost. At the end of the day, these employers are left with two options: refuse to hire smokers or charge a "tobacco use fee".


Compiled by: Sudhir Jain

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