Smoking has been in steady decline in the United States for decades, with Gallup reporting that smoking rates among adults have dropped from 45 percent in 1953 to 16 percent in 2018.
Nevertheless, according to the CDC, almost 38 million adults in the country still smoke cigarettes regularly (defined as “every day” or “some days”). This doesn’t even take into account anyone who enjoys pipe tobacco, cigars or other cigarette alternatives.
The malignant effects of these habits are well documented. In addition to the personal health issues individuals suffer, smoking also impacts non-smokers, both in terms of health risks and more expensive healthcare.
The following is an exploration into just how much smoking costs businesses each year and what measures employers can take to reduce smoking rates among their employees.
CDC research places the increased cost of employing a smoking adult at nearly $6,000 per smoking employee, per year. Much of this figure comes from lost productivity and increased healthcare costs, but it also takes into account other less obvious expenses.
For instance, businesses that hire smokers and allow smoking on premise spend an average of $728 more annually to maintain 1,000 square feet than organizations that don’t have any smokers working for them.
The added expense includes increased cleaning services, more frequent painting, and the need to replace furniture, window coverings, shades and carpeting more often. Considering the average commercial building runs between 12,000 and 19,000 square feet, smoking-related expenses can add between $8,736 and $13,832 to a typical business’ facility costs each year.
Another major area of hidden cost is second-hand smoke, which the CDC estimates to impact about 20 percent of American workers. As one might expect, second-hand smoke leads to higher healthcare costs and lost productivity amongst an entirely different subset of employees.
In total, smoking is estimated to cost the United States’ economy $300 billion annually in direct medical costs and lost productivity.
While smoking is a nationwide problem that affects every sector and industry, the problem is especially concentrated among certain businesses.
Perhaps not surprising, considering smoking rates are higher among people with low socioeconomic status, the habit is especially common in the mining, construction, hotel and food service industries. Tobacco use rates are much higher among adults who haven’t completed high school, and those who live at or below the poverty level. Most jobs in these industries don’t require a high level of education and many jobs don’t pay a lot, which partly explains why smoking rates in each of these industries is around 30 percent.
It’s not just these industries that continue to have above-average smoking rates, though. A separate study funded by the CDC found that smoking rates in real estate (including rental and leasing) and the legal industries remained mostly unchanged. Between 2004 and 2012, a time during which average rates across the board fell 4.3 percent, real estate saw just a 0.9 percent decline and legal saw only a 0.4 percent change. This is despite these industries being very different from mining, construction, hotel and food service work (although the education and pay in real estate and legal occupations can vary).
Before turning to potential solutions, it’s important to understand that most employers aren’t able to simply avoid this problem by not hiring smokers to begin with. Many states have laws that protect applicants and employees from being discriminated against because they participate in a lawful activity outside of work, and some states specifically protect smokers from negative actions by employers.
At the time or writing, 29 states (and Washington, D.C.) had relevant statutes in place: California, Colorado, Connecticut, the District of Columbia, Illinois, Indiana, Kentucky, Louisiana, Maine, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, Wisconsin and Wyoming.
The American Lung Association has detailed information on state-specific laws, and businesses can consult an attorney in their state for information relevant to their specific situation.
Even when it may be legal to only hire non-smokers, doing so might not be in the business’ best interest. Such a policy could force a business to turn away qualified talent, and the policy may prove ineffective if applicants temporarily quit until they’re hired but take up the practice again afterward. Also, a ban on hiring smokers may come with other, unanticipated side effects.
Most businesses ultimately find themselves employing smokers and need to deal with the financial consequences. Thankfully, there are several ways businesses can address the issues that hiring smokers presents.
The most comprehensive way to address the increased costs that smokers have on a business’ bottom line is to help them quit altogether. While businesses may not be able to do this all by themselves, they can play a critical role - and there are significant steps they can take to help employees attain a more healthy lifestyle.
First, the CDC has a couple of simple recommendations that every business can put in place. Implementing a smoke-free worksite policy (which is different from setting hiring practices) and making employees aware of free resources that help with quitting are important first steps. They won’t be enough on their own, but the steps are easy to implement almost instantly. The American Cancer Society has a smoke-free worksite policy template for businesses that need one.
Second, businesses can make sure that whatever health insurance they offer includes coverage for quitting assistance programs. The coverage should include both medication-based and counseling programs, and associated copays or coinsurance for these services should be kept low, if possible. This will undoubtedly increase a plan’s premiums, but the Affordable Care Act allows employers to add a premium surcharge of up to 50 percent for employees who smoke (more on that later). The surcharge will help cover the increased premium in most cases.
Third, any quitting assistance programs that have proven track records of success can be further incentivized through value-based insurance design. Value-based design incentivizes plan participants to use services that are more effective and beneficial through financial incentives.
For instance, a group plan that utilizes this strategy might offer ultra low- or no-cost copays for smoking cessation products and services that have an established return on investment. This certainly can help encourage more smokers to take advantage of these products and services by reducing or eliminating any cost barriers.
Fourth, employers can (and quite often do) implement premium differentials for those who smoke. These can be presented as a surcharge which smokers pay, or conversely, as a discount non-smokers receive. The latter approach is typically more effective as it taps into something behavioral economists refer to as a "framing bias". In this case, offering non-smokers a "discount" rather than presenting smokers with a "surcharge" taps into an innate "loss aversion" behavioral bias we all have to avoid losses more strongly than we desire to achieve gains. (e.g. Smokers will feel as if they are "missing out" on a discount which is being enjoyed by others.)
To be sure, there are lots of other ways employers can reward non-smokers and, in-turn, entice smokers to quit. These include HRA and HSA contribution differentials, participatory and/or outcomes based wellness incentives, and even some out-of-the-box experimentation with other behavioral economic strategies which can be very powerful motivators of behavioral change. (One of the more interesting experiments we recently came across involved an opt-in betting program CVS Pharmacy experimented with to great success.)
To explore quitting assistance plan options that might work for your company and employees, talk with one of our knowledgeable representatives. Our team members have helped many employers set up group plans and other programs that incentivize employees to quit, and they have the expertise to help you devise an effective plan, too.