Premium Differentials and Surcharges

Powerful Tobacco Control Strategies

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CLEAR INSIGHTS

TABLE OF CONTENTS
Introduction ........................................................................................................... 3 Premium Differentials on Tobacco Use ................................................................ 3 Definition of a Premium Differential ............................................................... 3 A Typical Premium Differential........................................................................ 3 Success of Premium Differentials .................................................................. 3 Productivity and ROI ............................................................................................. 4 Tobacco Users Are Costly .............................................................................. 4 Premium Differentials: a Cost-Neutral Solution ............................................. 4 How to Implement a Successful Premium Differentials Program ........................ 5 Best Practices from Our Experienced Clients................................................ 5 About Us ............................................................................................................... 7

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

CLEAR INSIGHTS

Introduction
Alere Wellbeing evaluation and client feedback have shown preliminary evidence that incentives are a successful part of an employers comprehensive tobacco control strategy. One of the most popular incentives to implement is a premium differential or surcharge. This brief defines what premium differentials and surcharges are and will also provide you with best practices from Alere Wellbeing clients.

Premium Differentials on Tobacco Use

Definition of a Premium Differential
When employers and health plans charge higher health insurance premiums for employees who use tobacco, it is called a premium differential. A well-designed premium differential has intuitive appeal, sends a positive and decisive message about the importance of quitting tobacco use, is an excellent vehicle for financing a tobacco cessation program (making it costneutral), and is a long-term solution that provides measurable outcomes.

A Typical Premium Differential

Employees who identify themselves as non-tobacco users or who attempt to quit by signing up for the companys tobacco cessation program are paid up to 20 percent of their health plan premium contribution. This can range from a $100 annual bonus to $25 per pay check.

Success of Premium Differentials

Many of our clients have found that by positioning a premium differential as an opportunity for reward rather than as a penalty or surcharge, they can increase enrollment in the Quit For Life Program. Clients do this by charging a higher health insurance premium for all employees and then awarding those who can prove they are non-tobacco users or that they are tobacco users who are engaging in the quitting process.

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

CLEAR INSIGHTS

Productivity and ROI

Tobacco Users Are Costly
Tobacco users cost employers $196 billion annually, an estimated $7,874 per employee per year in medical and productivity costs. With a national average tobacco use prevalence of 20 percent, a company of 10,000 employees and their eligible dependents is incurring an estimated $16,417,480 per year in excess costs associated with smoking.1 Employees tobacco use costs businesses even more when absenteeism, lost productivity due to smoke breaks, and workers compensation claims are included. Productivity and lost earnings because of smoking-related disease and premature deaths cost an additional $92 billion a year to what employers are spending on direct medical costs due to tobacco use.2 Reducing tobacco prevalence within an organization impacts cost exposure more than the reduction of any other risk factor.

Premium Differentials: a Cost-Neutral Solution

When implemented successfully, a positive incentives program is actually an excellent vehicle for financing a tobacco cessation program and can potentially be cost-neutral. Many employers find that charging smokers a premium differential or surcharge can help pay the healthcare costs of non-tobacco users as well as fund the program for those who are trying to quit.

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

CLEAR INSIGHTS

How to Implement a Successful Premium Differentials Program

Best Practices from Our Experienced Clients
Provide a supportive environment for those quitting. Incentives succeed when launched in conjunction with a comprehensive cessation program. Many of our clients use a variety of tactics including policies for a smoke-free worksite, access to free coaching calls and medication, premium differentials, and other incentives for engaging in and completing the program. Our clients find the most success when they require and encourage program participants to complete coaching calls. Promote your tobacco cessation program. Clearly communicate enrollment details to your employees and provide reminders of how premium differentials work. Alere Wellbeing can send communications to participants to remind them of program offerings and encourage them to complete their calls. Structure premium differentials to reward discreet activities. The most effective way to encourage participation in a tobacco cessation or wellness program is to incent engagement in the program and reward healthy behaviors along the continuum of program completion. Incentives that are tied to short-term goals such as logging onto a web program or completing a call will help you support activities and behaviors that you want to encourage. Reward the small steps your employees are taking to change their behaviors. Establish clear policies and enforce them. Provide clear rules of engagement and back them with solid policies. Clearly communicate these policies, and require employees to report a change in tobacco use status. Monitor dishonesty and noncompliance meet them with the appropriate consequences. Set up systems for the delivery of awards. Will you award a $100 annual bonus to nonsmoking employees, or add an extra $10 to each paycheck? Monetary incentives must target the appropriate demographic of your population. Workforces with larger salaries will hardly notice a $10 reward; workforces with smaller salaries will pay more attention to the extra money.

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

CLEAR INSIGHTS

Best Practices from Our Experienced Clients (cont.)

Coordinate internal support and vendor integration. Know how you will administer and require your tobacco cessation vendor to track, communicate, and integrate with your other programs. Determine how you will track participant engagement. Offer the incentive year-round. Motivations for quitting will ebb and flow for each tobacco user at different times. Providing year-round access improves the likelihood of success. Alere Wellbeing supports engagement by reporting back to our clients for ease of monitoring and fulfilling incentives and/or processing premium differentials. Build in time for legal and compensation review. Ensure that the proper associates at your organization are given the opportunity to review the structure of your premium differentials program so that every party can rest at ease.

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

CLEAR INSIGHTS

About Us
Alere Wellbeing
Alere Wellbeing (formerly Free & Clear) drives sustained health behavior change by connecting individuals with knowledge and information, and then empowering them to act on that knowledge to improve their own health and wellbeing. Alere Wellbeings evidence-based programs address modifiable health risks that contribute to chronic disease: tobacco use, poor nutrition, physical inactivity, and stress. Current clients include 27 state governments and more than 600 health plans and employers, 63 of which are in the Fortune 500. Alere Wellbeing is known and respected for its pay-for-performance business model, intense focus on scalable service quality, dedicated account management, continuous program improvement, and transparent reporting of measurable outcomes at the individual participant and aggregate population level. Alere Wellbeing has contributed to more than 100 published research studies and maintains collaboration with the American Cancer Society and an active research program funded by the Centers for Disease Control, American Legacy Foundation, and the National Institutes of Health. More information about Alere Wellbeing can be found at www.alerewellbeing.com.

The Quit For Life Program

Offered in collaboration with the American Cancer Society, the Quit For Life Program has been the nations leading evidence-based tobacco cessation program for more than 25 years. The Quit For Life Program employs an evidence-based combination of physical, psychological, and behavioral strategies to enable participants to take responsibility for and overcome their addiction to tobacco use. For more information on best practices, tobacco cessation programs, or Alere Wellbeing, please email us at wellbeingsales@alere.com or call us at 866-434-9750.

CITATIONS
Bartlett JC, Miller LS, Rice DP, Max WB. Medical care expenditures attributable to cigarette smoking United States, 1993. Morb Mortal Wkly Rep. 1993;43:469-472.
1

Centers for Disease Control and Prevention. Annual smoking-attributable mortality, years of potential life lost, and productivity losses United States, 1997-2001. MMWR. 2005;54(25):625-628.
2

Premium Differentials and Surcharges: Powerful Tobacco Control Strategies

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