Under Health Care Reform, smokers can be charged 50% more than non-smokers for health insurance.  Life Insurance Premiums are already 250-300% higher for smokers.   This is a great article on companies that are already charging more… and how they are changing their processes. – Reeve

Marketwatch – Jen Wieczner 3/5/2013

Like many firms, Direct General places a hefty surcharge on the health
insurance of workers who smoke—an extra $480 a year in premiums. And for
years, the Nashville-based insurer levied the fine the way most other
businesses do: using the honor system.

But last year Direct General began requiring that the 1,400 employees in
its health plan prove their nonsmoking status by taking nicotine
screening tests, with the hope of getting a more accurate assessment.
Not surprisingly, perhaps, the proportion of employees paying the
tobacco surcharge has jumped, from 21% in 2010 to nearly 31% today. “We
had some very honest people,” says Bill Smith, the company’s senior vice
president for human resources. “And some who would say they weren’t
smokers and they were—lurking around the other side of the building
where no one would see them.”

While most firms that penalize smokers through tobacco surcharges—or
that reward nonsmokers with lower premiums—still rely on their
employees’ word, roughly 10% have started screening for nicotine (or its
biometric marker, cotinine) to keep their employees honest, estimates
Michael Wood, senior health management consultant at human resources
firm Towers Watson. That’s up from only a handful of firms a few years
ago.

Xerox this year began screening its employees for nicotine use, in
addition to assessing other health indicators, like cholesterol. The
company rewards employees with a $300 discount on their insurance if
they take the test and another $300 discount for testing tobacco-free
(up to $1,200 for an employee plus covered spouse), according to Xerox’s
employee benefits summary. Marathon Oil and construction firm Jacobs
Engineering Group also test their workers for nicotine, with nonsmokers
able to earn cash or premium reductions. (Representatives from Xerox,
Marathon and Jacobs did not respond to requests for comment.)

Experts believe more firms will put workers to the test, as they
increasingly levy steep fines on smokers: In 2014, nearly three-quarters
of employers plan to reward or penalize employees based on their
tobacco use, compared with only 44% this year, according to Towers
Watson. Starting next year, smokers may pay even more as new Affordable
Care Act guidelines, still being finalized, would allow employers to
penalize them with surcharges worth up to 50% of the total cost of their
health coverage—compared with the 20% currently allowed. For a company
with individual premiums of $100 a month, a smoker would pay $600 more
for the year than a nonsmoker, up from just an extra $240 this year. (In
practice, employers may offer non-tobacco-users a 50% “discount.”)

Companies say the onerous surcharges will encourage smokers to quit. But
raising them even further could backfire if people are more motivated
to lie to escape them. With so much money at stake, experts say
employers have to test workers, rather than rely on them to own up to
their cigarette habit. “If it’s self-reported, it doesn’t mean much,
because most people aren’t going to self-report that they smoke,” says
Sunit Patel, a senior vice president in Fidelity’s benefits consulting
group.

Employers want to force the smokers to cough up the cash, which helps
cover their additional health-care expenses. (Employers pay an extra $21
per smoker per day in additional medical costs and lost productivity,
according to a white paper by rapid diagnostics firm Alere, or $7,874 a
year.)

Critics of nicotine screening, however, including the American Lung
Association, say the new tests can be unreliable. Plus, trusting
employees to be honest fosters a culture of ethics and trust: Paul
Terry, CEO of StayWell Health Management, which runs corporate wellness
programs, says instead of testing, employers should ask workers to sign a
legal-sounding pledge that they are tobacco-free, or even testify to it
over the phone. Introducing tests could damage morale, say some
wellness experts. “What is the actual effect of upsetting all of the
compliant folks for the sake of catching the few that are not?”says
Francois de Brantes, executive director for the Health Care Incentives
Improvement Institute.

At least one company has tried and rejected testing smokers. Affinia
Group, an industrial manufacturing firm based in Ann Arbor, Mich.,
required in 2011 and 2012 that employees take the test in order to
collect a $100 reward for being tobacco-free. But this year, the company
backed off, asking employees to simply admit whether or not they smoke.
“The reason for this switch is that we have a high level of trust in
our workforce, to be honest,” says Bob Soroosh, the company’s director
of benefit administration. But he notes that Affinia’s $100 tobacco-free
incentive isn’t so high that employees would lie to receive it: “Any
employer that is charging a medical plan premium of over $1,000 more for
smokers should only accept a third-party test, not a self-report,” he
says.

While companies have so far been slow to implement nicotine
screenings—Alere says 99% of its corporate clients are still enforcing
tobacco-free surcharges with the honor system—some experts believe more
employers will turn to tests as pioneering firms report successful
results, such as collecting more surcharges. “I think it’s way too early
to say whether or not cotinine testing is leading to more people
telling the truth,” says Sean Bell, executive vice president of Alere
WellBeing, which recently began offering the company’s new saliva-based
cotinine test to employer clients. “It’s a hypothesis, and it’s one our
employers are willing to test.”

Meanwhile at Direct General, executives have been pleased by the
collection of more tobacco surcharges, which help fund the company’s
wellness programs. And employees—both smokers and nonsmokers—have been
satisfied knowing that everyone is paying what they deserve, says human
resources VP Smith. “We did anticipate that our reported tobacco user
rate would go up as a result of testing,” Smith says. “What we didn’t
anticipate was the reaction from many of our employees who were glad we
were testing so the surcharges would be fairly applied.”