NCPA - National Center for Policy Analysis

Companies Get Tougher with Employees Who Smoke

July 15, 2011

Many companies use quiet incentives to encourage desired employee behavior, such as losing weight.  Not Macy's.  Beginning July 1, workers at the department store chain who admit to using tobacco will be surcharged $35 a month, or $420 a year, for health coverage.  The extra cost will be deferred only if smokers enroll in a free quit-smoking class.  Their progress will then be reviewed after six months, reports BusinessWeek.

Instead of using carrots to encourage smokers to kick the habit, businesses increasingly are wielding sticks.

  • At PepsiCo, smokers pay an annual $600 insurance surcharge, while publisher Gannett charges $60 a month.
  • Some go even further: Union Pacific and Scotts Miracle-Gro refuse to hire smokers.
  • Between medical spending and productivity losses, smoking costs the United States more than $193 billion a year, says the U.S. Centers for Disease Control and Prevention.
  • Tobacco use is responsible for one in five U.S. deaths.
  • For employers, a smoker is 18 percent more expensive than a nonsmoker, says Cathy Tripp, a consultant at Aon Hewitt.

That cost gap likely will widen beginning in 2018 when, under a provision of health reform legislation passed last year, companies with health plans that spend more than average will have to pay an additional federal tax.  That may push some to reduce employee coverage.

The tough tactics can have an impact: Scotts Miracle-Gro says its health premiums have risen at about half the U.S. average since implementing the smoker hiring ban.

Source: Pat Wechsler, "Companies Get Tougher with Employees Who Smoke," BusinessWeek, June 30, 2011.

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