If your company aims to reduce tobacco use among employees, one way it may consider doing this is by charging tobacco users more for their health insurance premiums.
Some call this difference in health insurance premium amounts a “premium differential” or a “tobacco use surcharge.”
What is a tobacco surcharge?
Under the Affordable Care Act (ACA), group health plans (and self-insured employers) can charge tobacco users up to 50% more for their health insurance premiums than non-tobacco users, and when they do this it is called a tobacco surcharge.
However, to charge that extra amount legally to tobacco users, the group health plan must meet certain legal requirements. These legal requirements include ACA, Americans with Disabilities Act (ADA), and other civil rights laws considerations.
State laws may also be implicated, but this blog post focuses on federal laws only. So before implementing any tobacco surcharges, be sure to check if your state law also adds restrictions.
ACA 5-factor test for outcomes-based programs
The ACA divides wellness program activities into 2 groups: participatory and health-contingent. Health-contingent programs are further divided between activity-only and outcomes-based programs.
In a participatory wellness program, a participant earns incentives merely by participating in the program. The participant is not expected to achieve a certain wellness goal, such as losing a certain amount of weight or having a certain blood pressure level.
That contrasts with participants in health-contingent wellness programs. In those programs, incentives are tied to achieving a health status goal, such as not using tobacco or having a certain weight or blood pressure (outcomes-based).
Incentives (such as a premium differential) tied to not using tobacco is an outcomes-based wellness program.
Barbara L. Zabawa – Truth Initiative – 2022-07-09.
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