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Employee Benefits

Rethinking Tobacco Penalties

November 17, 2022

In honor of the American Cancer Association’s “Great American Smokeout,” which occurs each year on the third Thursday in November, let’s shine some light on a topic that’s not talked about much in the workplace today – tobacco cessation.

Yes – a controversial and complex topic that isn’t much fun to talk about.

However, it is time to think differently about how we approach tobacco cessation and more specifically, tobacco surcharges in the workplace.

What is a tobacco surcharge? Tobacco surcharges may also be referred to as tobacco premiums, premium incentives or non-smoker discounts. A most common practice for many employers is to apply a discount/surcharge (depending on how it is looked at it or how it’s communicated) to employee insurance premium contributions through the employer-sponsored health plan.

According to Employee Benefit News, 48% percent of employers planned to tackle tobacco cessation in their top three priorities for 2022, as reported by a benchmark study conducted by digital health company, Pivot. Employees are increasingly smoking and vaping on the job during COVID, with 96% of tobacco users engaging while at work.

Do Tobacco Surcharges Even Work?

It depends on your goal.

According to the American Lung Association, punitive measures like tobacco surcharges have not been proven effective in encouraging smokers to quit or reduce tobacco use. A surcharge will successfully penalize tobacco users, but most likely it will not help them quit.

Therefore, if your goal is to encourage and motivate tobacco users to quit, the answer is no, in general, tobacco surcharges don’t work.

If your goal is to charge tobacco users more money on their insurance premiums, they work.

A study published in the National Library of Medicine reported that evidence suggests that the ACA’s tobacco surcharges reduced insurance take-up and did not increase smoking cessation. The study concluded smokers facing a surcharge were no more likely to quit than those who were not subject to a surcharge and were less likely to quit when the surcharge was of low value. This suggests that tobacco surcharges increased neither smoking cessation nor financial protection from high health care costs – the primary goal of the ACA.

Furthermore, according to the ALA, tobacco surcharges are significant barriers to affordable health insurance. A Health Affairs article reports that they found the tobacco surcharge rate averaged approximately 14% and that it was associated with lower total enrollment as well as a reduced share of total enrollees who reported any tobacco use.

Why Isn’t the Current Approach Working?

We all know that quitting isn’t easy. There are many factors at play in quitting including nicotine addiction, social habits, stress management issues, and much more. It’s a complex behavior change endeavor and, in most cases, paying more money for insurance based on tobacco use status doesn’t help the tobacco user, but instead can produce more guilt and shame that can be associated with tobacco use.

Research from the Society for the Study of Addiction has reported in a recent study that there is one tactic smoking-cessation advocates shouldn’t use – shaming. In the study, smokers who were confronted with negative stereotypes commonly associated with smoking were more compelled to light up sooner.

Is a Tobacco Surcharge Right for your Organization?

Consider these questions:

  • Is one of the goals of your well-being strategy to show employees you care?
  • Is your well-being program a way to help retain employees by promoting employee well-being?
  • Do you aim to help tobacco users quit?

If your answer to any of these questions is yes, and you are currently penalizing employees or spouses for using tobacco through a tobacco surcharge, there could be a conflict with what you are trying to achieve.

Employers can legally deploy this strategy (if allowed by their state) if designed properly with a reasonable alternative standard (RAS) amongst other legal design obligations. However, just because organizations are legally allowed to penalize tobacco users and many employers have deployed this strategy for years, doesn’t mean it’s working as originally intended.

Reframing Tobacco Surcharges

Consider the many health behaviors that have a detrimental impact on our overall health and well-being. The list includes, but is not limited to, drinking more than 1-2 alcoholic drinks per day, being overweight or obese, physical inactivity, stress, etc. If there are many health behaviors that can negatively impact our health in addition to tobacco use, why single out tobacco status as a way to penalize employees on their health insurance premiums?

It could be suggested that penalizing or charging your tobacco users a surcharge on their insurance premiums shouldn’t necessarily be a part of a “wellness program” or well-being strategy if the exercise does not help people quit as intended to support tobacco cessation.

However, if the goal of the tobacco surcharge is to “tax” or penalize a member of the health plan for choosing to use tobacco, a tobacco surcharge will successfully meet that goal – but then the strategy would better fit as a health plan management or benefit contribution strategy.

Design a Supportive Tobacco Cessation Approach

Consider these steps as a more supportive strategy that may actually help tobacco users quit or reduce their tobacco use.

1. Understand your tobacco user culture, policies, and environment

The cultural norms and company policies may not be supporting your goals to support tobacco cessation. Consider these questions:

  • Can a non-tobacco user easily take a well-being or walking break as compared to a tobacco user taking a “smoke break”?
  • Is there a social component associated with tobacco use or smoke breaks that appeals to tobacco users?
  • Are tobacco users “vilified” in any way that could further cause shame and guilt?
  • Does your tobacco cessation strategy align with your organizational values and/or well-being approach?

Consider making changes that support tobacco cessation and respect tobacco users at the same time.

2. Offer financial support instead of penalties

Employers can save nearly $6,000 per year for every employee who quits tobacco use, which means there is a financial incentive to help employees quit.

Instead of penalties, consider a well-being allocation fund that is offered to cover the cost of an employee’s desired tobacco cessation aid (i.e. counseling, additional NRT, hypnosis, or a general fund to be used at the employee’s discretion for any tobacco cessation method).

3. Provide a comprehensive tobacco cessation benefit

Policies that make it harder for patients to access smoking cessation treatments are barriers or obstacles to obtaining care. Removing these “utilization management” policies or barriers makes it easier for patients to obtain medications, attend counseling, and get the treatment they have determined with their doctor is right for them. Common barriers can include:

  • Cost Sharing
  • Prior Authorization
  • Duration Limits
  • Yearly or Lifetime Limits
  • Dollar Limits
  • Stepped Care Therapy
  • Required Counseling

You can also learn more from the CDC about best practices for designing tobacco cessation coverage benefits.

4. Clearly define your goal and communicate accordingly

If your goal of a tobacco surcharge is only to tax or penalize tobacco users, consider communicating this program as a part of your benefits or insurance premium contribution strategy, as opposed to categorizing this strategy as a “wellness program” component.

If your goal as an organization is to help people quit, shift your strategy and leverage the message that you care about them and want to help them quit, not tax them until they do.

Resources for employees:

Looking to evolve your tobacco cessation strategy for your workplace? Contact your Hylant health strategist to learn more.

Maddison Bezdicek Health Strategies Practice Leader

As Health Strategies practice team leader, Maddison supports the Health Strategies team with technical resources, team training, and project management to ensure Hylant is offering innovative health & well-being strategies to our clients.

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