November CBA Report

n part to encourage employees to be healthy, and in part to

reflect the additional medical expenses that tobacco users

often incur, many employers require tobacco users to pay

higher premiums for health coverage than their tobacco-free

counterparts. However, employers and employees often do not

fully understand the opportunities and restrictions that accom-

pany tobacco surcharges. This article is designed to provide some

basic information for employers who offer tobacco surcharges and

the employees who may be subject to them.

Employers are allowed to discriminate against

tobacco users – if they do so in the right way.

The Department of Labor views tobacco surcharges as a prac-

tice that discriminates on the basis of a health factor, so tobacco

surcharges must comply with certain rules issued under the

Health Insurance Portability and Accountability Act of 1996

(HIPAA).

Although tobacco use is not recognized as a disability under

the Americans with Disabilities Act (ADA), employers are limited

in how they can require employees to undergo medical examina-

tions. Therefore, employers must comply with certain ADA rules

if they will require a medical test (such as a blood or urine test) to

confirm whether an employee qualifies for the non-tobacco rate.

Employers can decide what activities constitute

tobacco use.

A tobacco surcharge could apply to any use of tobacco, nico-

tine, and/or any related products, so employers that apply these

types of surcharges should identify and clearly communicate the

activities that would cause the surcharge to apply. Because the

use of eCigarettes and vaping has become a popular alternative to

smoking, employers should be sure to specifically address these

activities in their communications.

Tobacco users can qualify for lower premiums

even if they continue to use tobacco.

HIPAA requires employers to offer tobacco users a reason-

able alternative method for qualifying for the lower premium

rate. For example, an employer may offer a smoking cessation

program. If the tobacco user completes that program, the tobacco

user qualifies for the lower premium for the entire year (including

By Kimberly Wilcoxon

A Primer on

Tobacco Surcharges

November 2017 CBA REPORT

Feature Article