Northwest Airlines plans to begin charging some of its workers who smoke an additional fee for health insurance. The Eagan, Minn.-based airline will be joining a small but growing number of companies targeting smokers as they look for ways to tap workers for a growing share of the escalating cost of health care.
Salaried workers, a sliver of the 35,000 people who work at Northwest, are scheduled to begin paying the fee Jan. 1, according to an internal company memo. The airline's proposals to revamp its union contracts also include thetobacco-use fee, which means it probably will apply at some time to all Northwest workers.
"It is something a lot of companies are looking at," said Blaine Bos, the office business leader for Mercer Health & Benefits in Minneapolis.
Next year, health-care costs are expected to increase another 8 percent, more than twice the rate of inflation, reports Towers Perrin, a benefits consulting firm. That comes after a string ofdouble-digit increases that has made rising health-care costs a key competitive issue for companies.
"With the redesign of our health plan, employees who utilize more health care will pay more of the cost," Northwest told its salaried workers in the memo, signed by senior vice president Mike Becker. "As a result of the redesigned medical plan, many employees will actually see a reduction in their monthly premium contribution rate."
Tapping smokers isn't popular with some Northwest workers. "Where does it stop?" grumbled Ronald Giovanetti, a striking mechanic at Northwest who describes himself as an on-again, off-again smoker. Soon, he predicted "they will start charging you on your lung capacity."
Even in this era of passing along health-care cost increases, slapping a fee on smokers remains uncommon. Most companies still embrace options that encourage smok- ers to kick the habit, such as covering a portion of the cost for nicotine patches and other remedies and providing smoking-cessation classes.
"It is actually atypical for an employer to take this type of negative approach," said Minneapolis employment attorney Kevin Coan. "When I say negative, I mean it penalizes an employee for smoking."
Research is clear: Financial incentives motivate smokers to try to quit, whether it is a tax on cigarettes or a surcharge on their health-care premiums, said Michael Scandrett, a health-policy consultant with Halleland Health Consulting in Minneapolis.
Just as smoking-cessation programs are examples of the "carrot" approach, the surcharge is more of a "stick" approach. Companies can use a surcharge as a way to encourage employees to be healthy or simply to cut costs. "Based on Northwest's financial condition, it seems to me that this is just a plain old cost-cutting measure," said Coan, who represents employers.
Northwest has some company in targeting smokers. General Mills, the Golden Valley, Minn.-based food giant, charges a smokers' surcharge of $20 per month for salaried employees and $10 per month for production employees. To apply the fee, the company asks workers whether they smoke or not, a company spokeswoman said.
Minnesota is one of about30 states with a smoker's rights law. Employers can't discipline or fire employees because they choose to smoke off premises when they're not working.
But state law permits employers to charge different premium rates for smokers as long as the rates reflect the increased costs to the employer.
Northwest declined to discuss specifics of its plan.
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Northwest plans to charge some of its workers who smoke an additional fee for health insurance.
Both companies are losing billions in industries dogged by overcapacity, as new competitors with lower costs flex their muscles and grab market share.
Fitch Ratings downgraded Northwest Airlines Corp. debt on Wednesday, saying the nation's fourth-largest airline is taking too long to cut worker pay while fuel costs remain high.
Between 2006 and 2016, the number of 55-plus workers is expected to grow by nearly 12 million