It’s open enrollment season at Frenkel Benefits and, like clockwork, at least one of our client account managers calls me in to work closely with their client on implementing or updating a tobacco differential in their medical plan. It’s a somewhat tricky thing to do, so I’m happy to help. However, inevitably – when we discuss certain requirements – I feel like the mole in that Whac-A-Mole arcade game. You know it well; (me) the helpful, yet elusive mole pops up and (the client) tries to whack it with a hammer repeatedly!
So why do HR professionals get so frustrated? Here are the two main reasons:
- There are two ways to access the non-tobacco user rate.
- Be a non-tobacco user OR
- Complete a Reasonable Alternative Standard (RAS). Sounds harmless; however, I have to tell clients that for the RAS, they cannot require the employee to quit using tobacco. And that’s when the hammer comes out!
- Once the RAS is set, if it can be completed before the plan year begins – such as having tobacco users enroll in a cessation program during open enrollment – there’s no problem. However, if the employee meets the RAS after the plan year has begun, the employer is required to reimburse the tobacco-user surplus contribution back to the employee, starting at the beginning of the plan year. Here comes that hammer again!
There are many nuances to implementing a tobacco differential, but you can break them up into two basic schools:
- Some things each company can choose for themselves: what it means to be a tobacco user, how much surcharge they want to collect (which could be up to 50% of the cost of coverage), whether or not they want employees to change their status midyear if they become non-tobacco users.
- Others are the legal requirements, which are non-negotiable.
Whether for my colleagues or for human resources professionals, I stand ready to help…just please set down the hammer!