Facing thousands in extra insurance costs, smokers appear to be the Affordable Care Act’s (ACA) biggest losers. Employers are allowed charge smokers up to 50% more for their medical coverage than nonsmokers , starting in 2014.
On November 25, Fox News put it best: “Obamacare Policies Slam Smokers,” , noting that “smokers are the only group with a pre-existing condition that Obamacare penalizes.” THCB itself has headlined: Smokers Face Tough New Rules under Obamacare.
And these headlines are absolutely accurate — meaning that, with the possible exception of the e-cigarette, ACA is the best thing that has happened to employed smokers ever.
Here is how we arrive at this conclusion. The data is mixed on whether smokers incur much higher healthcare costs or just slightly higher healthcare costs during their working ages than non-smokers do. None of the data shows that their costs are lower, but let’s say there is no impact on health spending.
Nonetheless, the following is incontrovertible: smokers take smoking breaks.
Remarkably, there are no laws specifically governing smoking breaks, and like most other quantifiable human resources issues, no one has quantified them. But we all observe these breaks, and about a fifth of us participate in them. They reduce productivity. By definition, if you are outside smoking, you are not inside working.
Sure, some smokers make up the time by working harder when they aren’t smoking…but (1) many non-smokers work hard too and (2) some workplaces, such as inbound call centers, don’t offer the luxury of catching up later because they operate in real time. Lacking quantification, fall back on your imagination…and imagine what you would do if you ran a company in which non-smokers spent as much time mulling around outside as smokers do. That should give you an understanding of the impact of smoking breaks on productivity.
Even absent quantification, most employers know there is a substantial productivity impact, and prior to the ACA, increasing numbers of employers addressed this productivity issue by not hiring smokers, or occasionally even firing them. Once again, no hard numbers exist but this practice was and is becoming common enough that 29 states now expressly forbid it.
Before the ACA, that was the choice employers faced, because once hired smokers could not be charged higher insurance premiums.
However, in economics the right answer is rarely all or nothing, and fortunately the ACA provides a surprisingly efficient middle ground. The extra premiums that a smoker can be charged and increasingly are being charged make hiring smokers a good deal for employers who must now offer them insurance. Particularly among lower-income workers (and smoking rates skew that way), the premium increase roughly offsets the productivity decrease. Further, the premium differential mitigates non-smoker resentment of the smoking breaks. Finally, employers no longer need to bribe (“incentivize” as they say) smokers to participate in what turn out to be ineffective smoking cessation programs. The total cost of smoking a pack a day could now exceed $5000/year for some people in some states, far greater than any incentive.
The Supreme Court upheld ACA as within the government’s power to tax, and (while they did not have smokers in mind), this premium is in reality the most efficient type of “redistributive” tax because it is paid by people (smoking employees) who incur the cost to the people (employers) who must absorb it.
Finally, let us dispense with the argument raised by the ACLU and others that smokers are no different from alcoholics or obese people and therefore should not be discriminated against. Wrong: smoking is a bright line. There is no such thing as second-hand obesity, vending machines in the break room don’t dispense cigarettes, and teenagers don’t sneak behind the barn to experiment by eating a few of their parents’ French fries. Alcoholics don’t go outside to take drinking breaks every couple of hours, no one looks at you funny if you say you don’t smoke, no one warns you not to smoke too much at company parties, and we’ve yet to see evidence that small amounts of tobacco are good for your heart.
So smokers are a class of their own and should be singled out for different treatment. That treatment under ACA is the best thing that could happen to smokers, especially in the 21 states where employers no longer have to hire them at all. The ACA could almost be considered the Smokers Full Employment Act.
Al Lewis is the author of Why Nobody Believes the Numbers, co-author of Cracking Health Costs: How to Cut Your Company’s Health Costs and Provide Employees Better Care, and president of the Disease Management Purchasing Consortium.
Vik Khanna is a St. Louis-based independent health consultant with extensive experience in managed care and wellness. An iconoclast to the core, he is the author of the Khanna On Health Blog. He is also the Wellness Editor-At-Large for THCB.