Are Smokers Really the ACA’s Biggest Losers?

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.

23 replies »

  1. I know a diabetic woman who insists on eating candy and downing sugary drinks… ALL DAY LONG. She seems to think her insulin shots negate the dangers of sugaring up her body. In the three years I have known her, she has left work to go to the emergency room FIVE times and has frequent issues with concentration due to spikes and drops in her glucose levels.

    I’m a smoker. I take the breaks I have been allotted by my employer. I have not missed time at work due to smoking. Of course I shouldn’t smoke and I have not quit trying to quit. For myself. It’s none of the government’s business and it is not the business of my employer. It is MY business.

    Last week I worked through five of my breaks. Why? In order to finish what my co-worker couldn’t finish due to another diabetic episode after pigging out on a cinnamon roll and cappuccino and not balancing out her meals.

    Should we watch diabetics and charge more to those who cheat on their diet? I don’t like that idea… but it makes more sense than targeting smokers.

    Get a life.

  2. “The healthcare costs associated with smoking should be covered by the smokers.”

    That was how the old individual insurance market worked. Smokers pay more. Pre-existing conditions pay more. Obese pay more. High-risk = higher cost.

    The new system is no one pays more – except smokers. This, even though the evidence for higher healthcare costs of smokers is not conclusive.

    My position is… if you want to argue smokers, and ONLY smokers, should pay more, then have enough integrity to admit that it’s an argument based on agreeing the government should have arbitrary power to mandate individual choices. Just stop pretending there is any foundation for a “it’s only fair” argument. It’s not fair. Life’s not fair. Calling something “fair” doesn’t make it fair.

  3. If we’re continuing to move into a shared cost type healthcare system it would only make sense for smokers to have to pay more. The healthcare costs associated with smoking should be covered by the smokers.

  4. The study requires subscription. The abstract says they studied “absenteeism, presenteesim, smoking breaks, healthcare costs and pension benefits for smokers” and they conclude “best estimate of the annual excess cost to employ a smoker is $5816”. The original posts concedes studies on increased health care costs are nonconclusive, and then “None of the data shows that their costs are lower, but let’s say there is no impact on health spending.”

    The whole focus is then on cost to productivity from breaks. On that exact point, A commenter on the linked study expressed concern that there is “a tendency towards oversimplification of a complex situation. In particular the assumption that the breaks a smoker takes from work are a cost to the employer. Clearly a smoking break is time away from workplace tasks, but the assumption that this is just about time at the desk ignores a growing body of evidence that taking regular breaks from work is beneficial to individual health”… (it goes on at some length – worth reading).

    The commenter also points out the study was not Peer Reviewed.

    I pretty much agree with Pat’s comment on 12/4@7:52. I’d add, many employers might well be surprised to find out that some of those employees they thought were non-smokers actually smoke.

    On the other hand, there are clear, peer reviewed studies of higher health care costs for overweight employees, older employees, employees with high risk lifestyles….

  5. Have any of you seen the lobbies in hospitals ours has fountains and pianos in one in the villages her in florida. stores coffee shops and that is not in the cafeteria but the lobby. it is crazy the money they spent on this building. so you can just imagine how much the paper pushers are getting paid. never mind the ceos. now wonder health care cost are so high, greed they go around trying to find where to cut the workers and make them more productive when they are working twice as hard, and they want to cut their benefits so they can get bigger bonuses and raises.these white collar workers who snub their noses at the blue collar workers make me ill. while they don’t ever seem to me to be working to hard and get paid so much. it is sick sick ,sick. the lower paid workers seem to be loosing all the respect they used to get from employers, they are just chattel now and that is sad. I used to enjoy work . My last two jobs I hated because they treated us like dirt .. do as we say work when we say no excuses. I am self employed now and if I hired someone I would treat them with respect and understand they may need time once in a while. I hate the way they did this study like people are numbers and not people. where did people loose their compassion. it is sad that is the way the employers treat the people that make them the money they enjoy. and still they treat them like dirt. go to a walmart or kmart or even a hospital and watch the lower paid workers. they are always frazelled. to much work for one person. most places had twice as many employees and now one person needs to do the job two or three did before. but the ceos and paper pushers go play golf on their two hour lunches and they wonder why the people are getting angry. it isn’t the pay scale as much as the way they are being treated and overworked on the job.

  6. I would just say the ones who did the studies are biased against smokers and did the math the way most politians do math .. make it go the way the want it. Just like any illness a smoker gets is put down to smoking and added in the cost of smokers even a hangnail is probably due to smoking. As for workers, everyone takes breaks and as you said most smokers are lower paid which means most are hourly workers and I was a supervisor and anyone working hourly gets so many breaks for the hours they work by law, not one of my workers ever got more breaks to smoke. they took their breaks outdoors so they could smoke instead of the breakroom. and a lot of non smokers joined them outdoors. not all people are as hateful to a group of people that are doing nothing wrong to anyone but themselves, so stop being such bullies. it is getting sick the way people are treating smokers like piranhas. go after the real problems in the world. gun control, violence, child abuse. leave the darn smokers alone. It seems to me like one group of people telling another how to live their life and I don’t see smokers fighting back and I really think they need to. and should. I hate it when people stick their noses in everyone elses business. everyone has something that they do that they shouldn’t and don’t be the first to cast the first stone. I am sure all of you have one thing you shouldn’t do and if not. how sad for you. but you could still die tomarrow from an unpreventable stroke or aneurism or live so healthy that you end up in a nursing home for 10 yrs with alhtimers . and that will cost a lot too. Just insure them and don’t force them to become liers to be able to afford it. that is wrong. anyone 10 lbs overweight better watch out they may come after you next year. it is just so wrong . It is starting to feel like big brother.

  7. So are you saying that all those companies that won’t hire smokers did the math wrong and all those states that took steps to prevent that were wasting their legislative time on a problem that didn’t exist?

  8. Now I think I understand what’s going on. The hospital’s “billed rate” is like the “manufacturers suggested list” in the car industry. It’s a number no one expects to get but a number that exists so that dealers can advertise 30%, 40%, 50% savings to attract the buyers and get good image to the dealers so the buyers think they’re getting a deal.

    When you see how much your insurance company “saved” you, you have a higher opinion of them. It’s all a con game and back scratching collusion.

  9. Bob, I might be wrong but don’t understand the difference between the EOB and the hospital bill. Bill says total insurance payments/adjustments $21k, but EOB says “Your plan paid” $6700. I assume the $23k was the rack rate, or the rate they bill to uninsured – hence the term “rack” rate, after old torture instrument.

  10. Bob, got those figures from the EOB and the bill from the hospital. I don’t know what the surgeon got. He’s a private doc who has privileges, but he is not extra billing above what insurance pays. This was also out-patient surgery – out before noon, and without full anesthesia. Maybe having it done in Chicago has something to do with it.

    The only good thing is we got 4 months to pay it off, by request.

  11. Note to Peter 1:

    why would your insurance company pay $21,000 for 40 minutes of surgery?

    Was this perhaps the rack rate and they actually paid much less?

    How much did the surgeon get? How much to the hospital? Was there a multi-nite stay?

    This absolutely cries out for national fee schedules if it is true.

    Thanks – I mean no criticism of you.

  12. “Or maybe just require the providers to “eat” unpaid deductibles and co-pays?”

    That sounds about right. My wife had bunion surgery, 20 minutes a foot, total bill about $23k (not including the doc) – insurance paid about $21K and we owe $2k in what’s called “co-insurance”. I think hospitals could find some efficiencies to cover that, unless you believe they are the most efficient well run institutions on the planet.

    Seems every time government wants to raise taxes we tell it to find “efficiencies”.

  13. I have the most profound respect for physicians, generally, but there is more than enough evidence to support a reasonable suspicion that some are “gaming the system.” “Overtreatment” (relative to the “undertreated”) and “defensive medicine” are also legitimate areas of societal concern. I have also occasionally sensed an attitude here that the sanctity of the patient-physician relationship somehow overrides the rights reserved to insurers under contracts of insurance. They can’t tell you what to do, but they certainly have the right, consistent with the language of the contract of insurance, to tell you what they will pay for. Same with the “regs” governing Medicare. “Paperwork” is simply part of the nature of the beast.

  14. I think most providers (physicians), especially primary care, would be willing to make less money, but have MUCH less government intrusion on the physician-patient relationship.

  15. Single Payer=Single Paymaster, and that singular entity won’t be distributing blank checks to providers.

  16. Medicare or Medicaid, either one brings extensive paperwork to providers which will further erode the patient-physician relationship, because then treatment will be based on the paperwork, not the patient. If we are to have Single Payor, then we need to cut back on all the onerous mandates for physicians under the current Medicare system. I don’t see this happening in this country.

  17. “Medicare for Everyone.” Let’s see: to obtain anything like the level of coverage I enjoyed under a group plan, I have to pay the government $107 a month for Part B of Medicare, and and about $275 a month for Medicare Supplement and drug coverage. That works out to about $5,000 a year. Under “Medicare for All,” would we be requiring each individual recipient to come up with that kind of money, or would we need a “Medicare Supplement and Drug Plan for All” as well? Or maybe just require the providers to “eat” unpaid deductibles and co-pays? (And I won’t speak of the substantial gaps in coverage in Medicare +Medicare Supplement plans.) Did you perhaps mean to say “Medicaid for All”?

  18. Looks like the conclusion “charging smokers more is good” came first, with “supporting” arguments heavier on quantity than quality.

    Of course everyone takes breaks during the work day. Do smokers take more breaks than non smokers? You didn’t even consider the possibility.

    Hourly employees who smoke are exactly as productive as non-smokers because they are paid for the exact same butt-in-chair (or behind counter) time.

    Salaried employees are explicitly paid for expected productivity, which generally is a combination of fixed availability (at ones desk) and delivery of product/service on time, which means they are expected to work more than 40 hours if necessary (and it’s always necessary).

    So – likely no productivity hit, no conclusive evidence of higher medical costs, even less evidence of second-hand impact (much less corresponding medical costs).

    Smokers are legally targeted to pay higher premiums because it’s politically safe to target them and, yes, the ACA mandates are so freaking expensive employers and insurance companies are seizing on whatever source of funding offsets they can find.

    By the way, the 50% penalty applies regardless of whether one is on a company group plan or self-insured or buys individual plan. It applies regardless of whether one is even employed.

    Finally – if Insurance premium pricing is not about Health Care costs/consumption, then it’s really not about insurance or health care. The whole argument is in support of redistribution of funding from unsympathetic parties to other more “worthy” people.

  19. The Affordable Care Act puts the USA one giant step closer to MEDICARE FOR EVERYONE, which is what the law should have been in the first place.

  20. I think you have nuggets of truth nested within a thesis in need of more data and flushing out.

    Lots of assumptions here: market responses and firms competing for smokers and non alike, wage effects, types of plans offered, whether states adjust for smoking (some dont), and type of biz (do customers see/smell smokers, ie, desirability).