If the U.S. Food and Drug Administration gets its way, tobacco companies will be required to include new warning labels on all cigarette packaging and advertisements in the United States. The labels, which would start appearing on cigarette packs in September 2012, have stirred up some controversy, however. This November, a federal judge granted the tobacco industry a temporary injunction, which blocked the requirement. The FDA has since appealed that decision.
The new labels are decidedly more aggressive and graphic than previous labeling. They represent the first significant change to cigarette warning labels in more than 25 years, according to the FDA.
Even if the graphic warning labels (one of them features a cadaver) don't inspire smokers to quit, financial reasons might -- in addition to the price of each pack, smokers pay for their habit through medical bills and higher insurance costs.
According to the federal Centers for Disease Control and Prevention (CDC), cigarette smoking costs the United States more than $193 billion each year ($97 billion in lost productivity plus $96 billion in health care expenditures). So, when it comes to insurance, it may come as no surprise that insurers want smokers to pay their fair share.
Insurance companies recognize that a smoking creates a higher risk of cancer and heart disease. Therefore, those who fill out applications for health insurance in the individual market are required to disclose whether they smoke -- and will pay higher premiums if they do.
New employment practices are making it harder for smokers to hide from these costs by enrolling in employer-sponsored group health insurance coverage. The Society for Human Resource Management (SHRM) cites a Hewitt Associates survey, which estimates that 64 percent of employers impose or plan to impose health insurance penalties for employees who smoke. Additionally, 45 percent require biometric screening to determine whether an employee smokes, and 17 percent require employees to pay penalties if their biometric screenings don't improve.
Government employees may find themselves paying penalties as well. As of 2011, nine states allow smoking surcharges for state employees, according to the National Conference of State Legislatures. Some, like Kentucky and South Carolina, charge flat fees to smokers, while others allow non-smokers to enroll in more affordable insurance plans that are off-limits to smokers.
Health care reform could make it easier for private employers to implement workplace wellness programs, as well as financial penalties and incentives for certain behaviors. Small businesses that don't already have wellness programs in place can apply for grants to help pay for perks (like health insurance discounts) to employees who participate, according to SHRM. Those who don't quit smoking would miss out.
Life and home insurance
Cigarette smoking can be a major problem when it comes to life insurance. According to a price comparison conducted by the Oklahoma Insurance Department, the cost of life insurance quadruples for some smokers. A 44-year-old male non-smoker in Oklahoma can expect to pay about $79 a month for a $500,000 term life insurance policy, while a 44-year-old male smoker can expect to pay as much as $330 a month.
Smoking also presents a liability when it comes to your home insurance. House fires sparked by cigarettes are rare, according to the U.S. Fire Administration (USFA). Yet they are more serious and deadly. Their fatality rate is four times higher than that of residential fires overall. This is likely because many cigarette fires occur when the smoker falls asleep, allowing the cigarette to ignite the bedding, according to USFA. The fire then can spread unnoticed and do far more damage.
While your insurer may never know that you smoke, a fire caused by a cigarette still will cost you. You likely will have to pay a deductible before your home insurance coverage kicks in -- and your insurer may raise your premiums down the road.