Employers May Avoid Hiring Smokers as Health Care Reform Kicks In

Shannon Green

Corporate Counsel

09-06-2012

As Democrats rally in Charlotte this week, it comes as no surprise that President Barack Obama’s landmark health care law is taking center stage. For many voters, the Affordable Care Act could be the deciding factor when they head to the polls in November. But of all the watchers who have tuned in to the Republican and Democratic conventions, perhaps no one is paying closer attention than employers.

Although companies won’t be required to provide health insurance that meets the law’s various requirements until 2014, a growing number of U.S. companies are starting to treat certain employees differently. Under a provision of the ACA, smokers can be charged up to 50 percent more than nonsmokers for health insurance.

John Banzhaf, a public interest law professor at George Washington University Law School, says the surcharge is necessary to keep employers and nonsmokers from having to bear the medical costs smokers impose on the health care system. “It’s very unfair not to do something about it,” he says.

Citing a 2011 survey by the Kaiser Family Foundation, Banzhaf says premiums for employer-sponsored coverage averaged just over $5,000 annually for an individual. Every employee who smokes, he says, costs the employer more than $10,000 in additional expenses that are “totally unnecessary.”

Although only anecdotal evidence is available, some employers are deciding that the best way to avoid such costs is to not hire smokers at all.

Twenty-nine states and the District of Columbia have enacted smoker protection laws that limit that practice, according to the American Lung Association. But despite laws prohibiting the discrimination against smokers in the hiring process, Banzhaf hasn’t “found a single case where there’s been a holding in favor of a smoker” in such a case.

State laws limiting the practice are rarely enforced, according to Banzhaf. And when they are enforced, he adds, they’re written so poorly that they offer workers little protection. Banzhaf has written a paper that offers guidance for employers looking to decline hiring smokers in states with such laws.

Connecticut passed its version of the law in 2003. Gary Phelan, a partner at Cohen and Wolf in Westport, says he has yet to see a single case filed under the statute. Phelan, who represents both employees and employers, says the primary smoking-related legal issue he encounters is related to secondhand smoke.

“Workers contact me because they’re having trouble breathing,” he says. He usually advises employers to establish designated smoking areas in workplaces, if they don’t have them already.

The American Legacy Foundation is dedicated to reducing the rate of smoking in America, and it develops programs that address the health effects of tobacco use in the workplace. Ellen Vargyas, the foundation’s general counsel, says people are often surprised to hear that ALF does not favor policies against hiring smokers. While she says the foundation recognizes that “companies want to get control of health care costs,” it tries to “make the case that these are just not good policies.”

For working-age people, employers are the primary source of health insurance. And policies against hiring smokers, she says, tend to disproportionately affect low-wage and less-educated individuals.

Before joining the foundation, Vargyas was legal counsel for the U.S. Equal Employment Opportunity Commission. Although smokers aren’t currently a federally protected class, she notes that a particular test, which is widely used to determine whether or not an individual smokes, could be discriminatory. Vargyas says that research has shown that after smoking the same amount as white individuals, levels of continine—the metabolite of nicotine—are higher for African-Americans.

Instead of banning smoking entirely, the foundation promotes the institution of smoke-free workplaces and company-sponsored smoking cessation programs. Those are two very inexpensive ways to effectively reduce workers’ use of tobacco, says Vargyas, which don’t compromise the employer’s ability to hire the best person for the job.

“Job decisions,” she notes, “are best made based on an individual’s qualifications.”