Study: Companies Pay Almost $6,000 Extra Annually for Employees That Smoke

U.S. businesses pay almost $6,000 per year extra for each employee who smokes compared to the costs for employing workers who never smoked, according to a new study from Ohio State University published in the journal Tobacco Control.

Researchers based their findings on previous studies that calculated the costs of absenteeism, lost productivity, smoke breaks and healthcare costs for smokers. They found that smokers cost their employers an average of $5,816 annually above the cost of a person who never smoked; costs that could range from $2,885 to $10,125. Smoke breaks accounted for the highest cost in lost productivity, followed by healthcare expenses that exceed insurance costs for nonsmokers.

According to their annual estimates per smoker, researchers found the following:

  • Excess absenteeism costs an average of $517 per year;
  • Presenteeism, or reduced productivity related to the effects of nicotine addiction, cost $462;
  • Smoke breaks amounted to $3,077;
  • Extra healthcare costs for self-insured employers came to $2,056.

The analysis used studies that measured costs for private-sector employers, but the findings would likely apply in the public sector as well, researchers noted.

The study focuses solely on economics and does not address ethical and privacy issues related to the adoption of workplace policies covering employee smoking. Researchers note that employers can use their cost estimates to develop tobacco policies. Increasingly, businesses have adopted tobacco-related policies that include requiring smokers to pay premium surcharges for their healthcare benefits or simply refusing to hire people who identify themselves as smokers. And while researchers acknowledge that providing smoking-cessation programs is an added cost for employers, they stress that employers recognize how difficult it is to quit smoking.

The analysis also took into consideration a so-called death “benefit” in terms of economics. For employers who provide defined benefit plans, meaning they pay retirees a set amount in pension each year, a smoker’s early death could result in an annual cost reduction of an estimated $296. This occurs when smokers pay more into the pension system than they receive in retirement — in effect, subsidizing nonsmokers’ pensions because they live longer. The analysis also took into account the known disparity in pay for smokers versus nonsmokers. In the calculations, smokers’ salaries were discounted by 15.6 percent to reflect their lower wages.

The researchers describe their findings as “needed factual context to discussions about workplace policies” intended to inform the debate over whether such policies should exist.

“Most of the places that have policies against hiring smokers are coming at it not just from a cost perspective but from a wellness perspective,” lead study author Micah Berman says. “Many of these businesses make cessation programs available to their employees.”

According to reports from the CDC a decade ago, productivity losses and medical costs amount to about $3,400 each year per smoker. However, the report looked at overall costs to the American economy from smoking-related deaths and did not try to identify those costs that would be borne by an employer. The CDC also says smoking accounts for nearly one in every five deaths — or about 443,000 — in the United States each year and increases the risk for such illnesses as coronary heart disease, stroke, lung cancer and other deadly lung illnesses.

Researchers say the study is the first to take a comprehensive look at the financial burden for companies that employ smokers.

Source: Ohio State University, June 3, 2013

2012 Healthcare Benchmarks: Health & Wellness Incentives

2012 Healthcare Benchmarks: Health & Wellness Incentives provides actionable information from 136 healthcare organizations on the use of incentives to promote health behavior change. Now in its fourth year, this report is designed to meet business and planning needs of health plans, employers, human resource executives, managed care organizations, hospitals and others by providing critical benchmarks in incentives use and impact.

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