Can we charge smokers more in premiums than non-smokers?

Charging smokers more in premiums than non-smokers is essentially the equivalent of providing a reward to employees who are able to stop smoking (or refrain from smoking). According to the Department of Labor, medical evidence suggests that smoking may be related to a health factor, and nicotine is a powerfully addictive drug. Providing a reward for not smoking would be considered a standards-based program under HIPAA so the initiative would need to meet the five requirements for a standards-based wellness program:

1. The program could not offer a premium differential of more than 50 percent of the cost of employee-only coverage;

2. It must be reasonably designed to promote health and prevent disease;

3. Participants must have an opportunity to qualify for the award at least once per year;

4. The plan must provide a reasonable alternative standard for individuals for whom it would be unreasonably difficult to quit smoking (and you may seek verification of this, such as a statement from a physician); and

5. Plan materials describing the terms of the premium differential must also disclose the availability of a reasonable alternative standard.

NOTE: You may have a smoking cessation program as part of a wellness program without having to worry about HIPAA’s non-discrimination rules, but the program cannot reward employees with regard to whether or not they refrain from tobacco use. An example might be a program that reimburses employees for the cost of participation in a smoking cessation program (the employee need not successfully quit in order to be reimbursed).

Regulations under the Americans with Disabilities Act (ADA) issued in 2016 placed a limit of 30 percent of the cost of employee-only coverage if the employer requires a medical exam (such as a blood test for nicotine).