Differential Wellness Programs Can Nip Smoking in the Butt

Monday, March 19, 2012


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Should you be rewarding employees who don't smoke with benefit premiums?

Last week, the Centers for Disease Control and Prevention took a critical step to reinvigorate the fight against tobacco use by launching the government's first-ever paid, nationwide media campaign to encourage smokers to quit – and to prevent children from starting.

This very public health issue is also increasingly being addressed by employers. With average healthcare costs for smokers $1275 higher than their non-smoking peers, companies are motivated to find ways to change their behavior – and the best way may be through their wallets.

By rewarding employees who don’t smoke with a premium differential – meaning they pay less for their health insurance than those who smoke – the hope is that tobacco users will covet the savings and do what it takes to realize them.

Non-Smoker Defined

One question employers may wrestle with is how to determine if an employee is a non-smoker. On this issue, employers have a few choices.

  • An employer could provide an affidavit form, asking the employee to certify that he/she is smoke-free.
  • The employer could require the employee to take the form to a physician and have the physician sign off that they employee is smoke-free.
  • An employee could provide a cotinine screening (a derivative of nicotine) in a health fair setting, which can be done with an oral swab.


Legally Speaking

Employers can be hesitant to implement a differential-based program for fear of raising discrimination concerns among employees. But premium differentials are legal for results-based wellness programs as long as they follow the guidelines as provided by the US Department of Labor in 2007. These rules permit this type of wellness program as long as:

  • The premium differential is not more than 20 percent of the total cost of employee-only coverage (or 20% of the cost of coverage if dependents can participate in the program). (Due to healthcare reform, this amount will increase to 30 percent in 2013.
  • The program is reasonably designed to promote health and prevent disease.
  • Individuals eligible for the program are given an opportunity to qualify for the discount at least once per year.
  • The program accommodates individuals for whom it is unreasonably difficult to quit using tobacco products due to addiction by providing a reasonable alternative standard (such as a discount in return for participating and completing educational classes or for trying a nicotine patch).
  • Plan materials describing the terms of the premium differential describe the availability of a reasonable alternative standard to qualify for the lower premium.


Communicate Early

Since premium differentials can be a new to many employees, it’s important that employers provide the following plan materials at the beginning of the wellness program.

  • A wellness summary and plan description
  • An outline of the appeals process the employee will need to follow if they dispute the accuracy of the results and/or if they have a medical condition and are requesting an alternative standard
  • Contact information for the appeals administrator


Offer Support

To help employees qualify for the wellness savings, employers may want to offer smoking cessation programs to support the employees who are trying to – or have recently – quit. Smoking cessation programs can be offered onsite, online or telephonically, or using any combination of the three approaches.

Before implementing a premium differential wellness program, be sure you understand how to design the plan. If you have questions, consult with a wellness expert. And remember: only those employees who are ready to change their behavior will be motivated by extra change in their wallet.

{image_2}Amy Gallagher has over 19 years of healthcare industry experience.  As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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