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Big Stink Employers Are Divided on Fines for Smokers

April 28, 2008
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Whirlpool Corp.’s move to suspend 39 smokers last week for lying on their benefits enrollment forms to avoid a $500 annual tobacco-use surcharge could be seen as part of a growing trend of employers cracking down on employees’ unhealthy habits.

But the Tribune Co.’s announcement just a few days later saying it was dropping its recently instituted $100-a-month smoker penalty indicated that some employers may be getting cold feet.

Benefit experts say these diametrically opposed developments demonstrate the importance of taking corporate culture into consideration before implementing wellness initiatives targeting specific employee behaviors. They also say that employers would be more successful in achieving their wellness goals by taking a positive, rather than punitive, approach.

After news of the suspensions at Whirlpool’s Evansville, Indiana, plant emerged, a spokeswoman for the Benton Harbor, Michigan-based major appliance manufacturer said that the employees were disciplined not because they were caught smoking, but because they had lied about their tobacco use on their benefit plan enrollment forms.

“The company routinely asks employees to confirm their status as a tobacco user or a non-tobacco user as part of the annual benefits enrollment process,” the company said in a statement. “When there appears to be a discrepancy between an individual’s documented status and their behavior, the company investigates. Falsifying company documents is a serious offense. Those found to have done so are subject to disciplinary action, which could include suspension and termination.”

Providing false information when signing up for any insurance plan is considered fraud, according to Alison Earles, an attorney and chief executive of ACE Ideas, an Atlanta-based consulting firm that specializes in wellness incentive programs.

“It’s the same as saying you’re married to your live-in lover in order to get them on your health insurance,” Earles said. “This might be considered an attempt to defraud a health plan ... as well as an attempt to defraud the employer.”

While at first some employee benefits experts speculated that Whirlpool’s move may be an indication that employers are becoming more aggressive in administering their wellness programs, they were stunned when the Chicago-based Tribune Co. announced it was ending its tobacco surcharge program just four months after it began.

In January, the publishing company began charging employees who smoked an additional $100 per month in premium for their health benefits. The fee was also assessed on those employees whose dependents were tobacco users.

However, the company decided to drop the fee instituted by the previous administration. Financier Sam Zell became chairman and chief executive in a private takeover last year.

The tobacco surcharge was “inconsistent with the new culture,” reported the Chicago Tribune, which is owned by the Tribune Co.

“We’d rather you use your own judgment when it comes to tobacco use, not impose ours upon you,” Gerry Spector, executive vice president and chief administrative officer, said in an e-mail to employees, according to the report.

About 600 of the company’s 16,000 employees had been assessed the fee, which will be refunded to them in May. The company also said it will continue to offer a free smoking cessation program.

“I find it odd that an employer would back off an initiative that clearly has tremendous long-term beneficial impact, first for employees’ lives and second for impacting health costs,” said Ray Brusca, vice president of benefits at Black & Decker Corp. in Towson, Maryland. “It flies in the face of employee engagement.”

Black & Decker started a $25 monthly tobacco-use surcharge in 2007.

The opposing developments “show the conflict employers face in trying to motivate employees to become more engaged in their own health, without looking like they intend to interfere with personal lifestyle decisions,” said Larry Boress, president and CEO of the Midwest Business Group on Health, a Chicago-based employer coalition.

Taken together, “these two extremes—disciplining workers over a stop-smoking incentive and discontinuing a stop-smoking incentive—are indicative of the troubles employers are having while grappling with efforts to manage health care costs,” said Bob Queyrouze, internal consultant-compensation/benefits/health and productivity management at the Federal Reserve Bank of Dallas.

“Some companies are considering more aggressive actions, such as not hiring smokers or putting restrictions on smoking, but they’re essentially experimenting,” said Tom Lerche, health care practice leader at Aon Consulting in Chicago. “They’re trying to figure out how aggressive they can be but, at the same time, respect the employee.”

Others companies, however, appear to be backing off, said Jim Winkler, national health care practice leader at Hewitt Associates in Norwalk, Connecticut. A recent Hewitt survey that found only 19 percent of employers said that employees who aren’t taking care of their health should pay more, down from 27 percent two years ago.

Winkler said much of the success of implementing wellness initiatives depends on how they are pitched to employees.

“If you market an incentive or a discount as a positive for people, it is much more broadly accepted,” he said. Unfortunately, both Whirlpool and the Tribune “positioned it as a surcharge.”

In the case of Tribune, “if they had put the same mechanism in place but marketed it as a discount for nonsmokers, they would have had a firestorm of people objecting about having it taken away,” he said.

And if Whirlpool had used that approach, the company may have had better compliance without having to resort to disciplinary action, Winkler suggested.

Andrew Webber, president of the National Business Coalition on Health, an association of employer groups based in Washington, also believes employers should use “carrots rather than sticks” to build employee trust. “Employers also need to clearly communicate expectations around employee lifestyle choices and give employees time and support mechanisms to modify behaviors before negative economic incentives are used,” he said.

Employers that carefully examine their organization’s culture and workforce, clearly communicate their objectives and take the time to determine whether there might be any unintended consequences or backlash “find their programs are accepted, understood and successful,” Boress said.

Ultimately, “every company has to figure out from a cultural point of view how to administer these plans,” including how they will enforce them, Lerche said.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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