Clarke & Company Benefits LLC

Session 2

High Cost of Smoking

5Insurance & Taxes

4Smokers in the Workforce

Outline

3Cost of Smoking

6This Week’s

Assignment

7Next Week’s Topic

1Last Week’s Assignment

2Cigarette Companies

Last Week’s Assignment: Quit Date Contract Signed1

o Did you talk to your family?

o What were your reasons for deciding to quit?

Quit Date Contract

2 Cigarette Companies

Ciga

rett

e Co

mpa

nies

The United States continues to be a leading producer of tobacco.

In 2006, U.S. cigarette companies spent:o $12.4 billion on advertising, double the cost from 1997.o $34 million per day on marketing.

The 5 major U.S. smokeless tobacco manufacturers spent:o $354 million on smokeless tobacco advertising and promotion in

2006.

U.S. consumers spent:o $90 billion in 2006 on tobacco products.

315 billion cigarettes were purchased in the U.S. in 2009:o 3 companies sold 85% of them.

121.4 million pounds of smokeless tobacco was purchased in the U.S. in 2009:o 3 companies sold nearly 90% of it.

3 Economic Cost of Smoking.

Direct medical costs and lost productivity associated with cigarette smoking are:o$10.47 per pack of cigarettes sold

in the U.S.

Smokers cost the economy $97.6 billion a year in lost productivity.

Cigarette smoking results in:o5.1 million years of potential life

lost in the United States annually.

Economic Cost of Smoking

Workplace: The Hidden Costs4

Smoking Costs

Find the estimated percentage smokers for your industry if you don’t know your company’s specific numbers.

Smoking Costs

Industry % of Smokers in Work Force

Transportation 46%

Food Service 45%

Construction Laborers 42%

Construction Trades 40%

Other Laborers 39%

Manufacturing 37%

Health Care 35%

Retail and Sales 27%

Upper Management & Executives 24%

Assistants 21%

Education 12%

Smok

ing

Cost

s Multiply the previous calculation by $3,400 cost per smoker. The output of this calculation is an estimate of the amount of money you spent each year because of smoking employees.

Total # of Employees X

Estimated % of Smoking Employees = Total # of

Smokers

Total # of Smokers X

Costs per Smoker($3,400) =

Estimated Cost of Smoking per Year

Smokers in the WorkforceApproximately 20% of the workforce smokes some form of tobacco.

Smoking increases the chances for developing a variety of health conditions which lead to:1.) More health care claims2.) Higher care bills 3.) Higher insurance premiums for employers & employees

Smoking employees on average cost an extra $45 per year in accidental injury & workers’ compensation costs.

5% of companies charge smokers more for healthcare premiums.

The cost of insuring smokers is greater than the cost of insuring nonsmokers.

People who smoke tend to be absent from work more often than those who do not. On average, Smokers miss over 6 days of work each year. Nonsmokers miss approximately 4.

Smoking, Absenteeism, and Health Care

According to the American Lung Association, smoking also leads to higher workplace accidents. Possible reasons for this include:o Loss of attentiono Higher levels of carbon monoxide leading to lower alertness and reflex

speed.

These workplace accident in turn could lead to higher workers’ compensation fees. o Businesses average $2,189 in workers’ compensation costs per

employee who smokes compared with $176 per nonsmoking employee.

Workplace Accidents

Hiring Difficulties

5% of employers prefer to hire nonsmokers, according to the most recent survey by the Society for Human Resource Management, and 1% do not hire smokers.

1.) Kalamazoo Valley Community College in Michigan stopped hiring smokers for full-time positions at both its Michigan Campuses.

2.) Alaska Airlines, based in Washington State, requires a nicotine test before hiring people.

3.) The Tacoma-Pierce County (Wash.) Health Department has applicants sign an “affidavit of nontobacco use.”

4.) Union Pacific won’t hire smokers.

5 Insurance & Taxes

» Each American household spends $630 a year in federal and state taxes due to smoking.

» On April 1, 2009:» The federal cigarette tax increased by 62 cents to $1.01

per pack

» As of July 1, 2010:» The average state cigarette excise tax rate was

approximately $1.44 per pack but varied from 17 cents in Missouri to $4.35 in New York.

» South Carolina – ($0.57)

Taxes

Life

Insu

ranc

e① The following numbers show

online quotes from BudgetLife.com

② Looking at a $500,000 policy on a 20-year term life insurance for a healthy 44-year-old male,① The lowest quote for a

nonsmoker was $1,140/year.

② For some smoking a pack a day, the lowest quote was $2,571/year, more than double the nonsmoker price.

According to eHealthInsurance.comThe monthly premium for a policy from Regence Blue Shield with a $1,500 deductible for a 44-year-old male:

1) Nonsmoker is $292.2) Smoker is $338/month

$552 more a year.

Health Insurance

…..…..

Smoking & Health Care Costs

• According to the Centers for Disease Control and Prevention (CDC), smoking costs the nation about– $167 billion a year in health care costs.

• People who smoke one or more packs of cigarettes per day generate health care costs that are– 18% higher than those of nonsmokers.

• Heavy smokers are likely to submit health claims in excess of $5,000.

Smoking & Health Care Costs

– The Higher costs for health insurance are shared between smokers and nonsmokers alike.

– In some instances, these higher rates have forced employers:

– To change the health insurance they offer,– To increasing employee premiums, or– By cutting back on benefits, or– Dropping insurance altogether.

Homeowner’s Insurance

- As a non-smoker, most insurance agencies will give you a 10% discount on your homeowner’s insurance.- Homes owned by smokers are at an increased risk of catching on fire:

- Over 20,000 residential fires a year caused by cigarettes.

- By children with access to matches/lighters

Car I

nsur

ance

Most auto insurance companies will give you a 5% discount for being a non-smoker.

o Smoking can cause a distraction from the road, leading to more accidents.

o Cigarette smoke while in a car can reduce visibility and can also stain the glass, causing further reduced visibility. This reduced visibility

leads to more accidents.

oEstimates are difficult, however, on average, smokers earn about 4-11% less than non-smokers.

oThis means that less money is collected for Social Security/Pension funds and therefore less money is available upon retirement.

Social Security & Pension

6 Possessions: Home & Car Value

Cleaning Costs

• Assuming that a person has possessions that are worth $10,000 and due to smoking they have to be replaced and devalue 10% more per year than a non smoker, smoking costs a smoker $1,000 more than a non smoker in the value and replacement of possessions.

• According to Contractors.com, – Priming and painting an average-size living room, dining room, and two

bedrooms would cost more than $2,000.– The Carpet Buying Handbook puts the average cleaning cost per square

foot at 28 cents, and the average home has 1,000 square feet of carpet. That’s $280.

– Add $55 to clean a typical sofa and $25 for a chair, says Diversified Carpet in San Diego.

Decreased resale value of smokers’ home:o Strong cigarette odorso Reduced market sizeo Burns and stains

Smokers’ houses often require all new paint and/or wall treatments, as well as professional drapery and carpet cleaning.

House Value

A 40-year-old who quits and puts the savings into a 401(k) could save almost $250,000 by age 70.

Sources

• http://articles.moneycentral.msn.com/Insurance/InsureYourHealth/HighCostOfSmoking.aspx

• http://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/index.htm

• http://www.costofsmoking.com/smokers_have_higher_home_owners_insurance_costs.html

• http://www.costofsmoking.com/• http://www.cancer.org/

References

• 1-800-QUIT-NOW• Cost of Smoking Calculator• BecomeAnEX.gov• http://www.lungusa.org/• http://www.smokefree.gov/

Assignment for Next Time

• Your assignment for next week:– Track your cost of smoking, to include:

• Actual cost of cigarettes• Breath mints, mouth spray, or car spray that you use

after smoking• Additional time taken to stop and pick up cigarettes

We will be discussing the Physical effects of Smoking, and how smoking negatively affects your health.

Next Group Session