The Ins and Outs of Tobacco vs. Non-Tobacco Rates

Many of our current clients, as well as small businesses across the country, are considering introducing tobacco vs. non-tobacco rates.  This article can be your cheat sheet for figuring out if the rates are right for you and how to introduce them to employees.

What rates can you charge?

There are essentially three options when it comes to tobacco rates.

1. Charge up to a 50% differential for employees that self-report
2.  Up to a 30% differential when clinical testing is used to determine if there is tobacco use
3.  A flat $50/month fee

The most common are charging the $50 a month fee because it makes the individual changes easier.

What steps need to be taken to put these rates in place?

The first thing that will need to be done is create a tobacco form.  This form will indicate which employees are tobacco users.  The way our current clients do this is simply adding one question to the employees profile on our online web portal.  All that needs to happen is for the employee to go in and check the box if they are a tobacco user.  For our system, it is that simple.  The rates that an employee will see after checking that box will be only the tobacco rates.

How to communicate changes to employees:

Communicating rate changes to employees are essential anytime rates are changed.  During Open Enrollment make sure to frame all messaging around tobacco use to make sure you cover all forms of tobacco.  When explaining this change to employees make sure you mention health risks associated with tobacco and how over time it leads to poor health.  This can then carry into how insurance companies charge more to groups that have anyone using tobacco. Make sure tobacco-using employees understand that they are being charged more than non-tobacco using employees to cover rate increases based on tobacco usage.

How to enforce tobacco rates:

Enforcing tobacco rates can be tricky; especially if employees are self-reporting.  Another reason that it is a little complicated is when an employee selected they are quitting after six months.  If an employee is found not to be adhering to what they selected, there are two options. The most common option is to increase the employees payroll cost at the next pay period.  The other option is to charge the employee retroactive to the Open Enrollment date.

If you are thinking about introducing tobacco rates, we hope that this guide will help get you started. 

For more information regarding tobacco rates or anything group benefits, visit us at GroupBenefitsMadeSimple.com. Also, remember to like us on Facebook and follow us on Twitter and LinkedIn.