Humana Aims To Phase Out Hiring Of Smokers, Where Permitted

Health insurer Humana Inc. (HUM) intends to phase out the hiring of smokers, where legally permitted--a move in keeping with its message that employers should encourage healthy behavior among workers.

The Louisville, K.Y. company already has a policy of not hiring smokers in southwestern Ohio, except for those who commit to stopping the habit. Humana plans to announce soon it won't hire any smokers in another state, Chief Executive Michael McCallister said, and it eventually plans to extend the practice nationally.

"We want to begin a long transition to an environment where it's not something people do," he said in an interview Thursday. He aims to institute the policy "wherever I can," although he concedes there are numerous states where Humana would not be permitted to bar employment on the basis of smoking.

Humana won't be the first employer to implement such a hiring ban. For a couple decades, Alaska Air Group Inc.'s (ALK) Alaska Airlines has declined to hire smokers. More recently, a number of U.S. hospitals, including the Cleveland Clinic, have instituted bans on hiring smokers, including screening potential hires for nicotine.

These policies have stirred criticism from smokers' rights advocates and even some health proponents.

"It's employment discrimination, and I don't think that employers should be engaging in discrimination, whether it's legal or not," said anti-smoking advocate Michael Siegel, professor in the department of community health sciences at Boston University's School of Public Health.

Siegel believes every workplace should be smoke-free and supports smoking bans for restaurants, bars and casinos. Bans on hiring smokers are different, in his view.

"It is making employment decisions based on a category to which a person belongs rather than to their actual bona fide qualifications for a job," and that could lead to bans on hiring overweight people, parents of young children or people who play hockey in their free time, he said.

Altria Group Inc.'s (MO) Philip Morris USA, the largest U.S. tobacco company, believes that "refusing to hire an applicant ... because this person is a tobacco user outside of the workplace is unfair and in some states is in fact illegal," spokesman Ken Garcia said. "It unjustly penalizes these applicants ... for use of what is a legal product."

Humana isn't instituting similar bans on hiring overweight workers or drinkers or fast drivers, although it does require employees, in order to receive coverage, to complete a health-risk assessment every year that includes information about such conditions or behavior. Restricting hiring based on weight is trickier than doing so for smoking, McCallister said.

The insurer, like many of its peers, also wants its employer clients to embrace the idea that they can curb health-care spending and improve productivity by promoting healthy employee behavior. Humana's new Vitality wellness program--offered via a joint venture with Vitality parent Discovery Holdings Ltd. (DCYHY, DSY.JO)--encourages healthy behavior by offering discounts and rewards to participating health-plan members.

McCallister also chairs the World Economic Forum's Workplace Wellness Alliance formed at the group's summit in Davos, Switzerland. The alliance is using research to try to build a case for encouraging healthy lifestyles for employees, he said.

While health insurers' medical costs have increased at a more moderate rate recently as patients' demand for services has lightened during the economic downturn, McCallister said, "the fundamental problem of health care has not gone away, that costs are too high and they're growing too fast."

On another topic, McCallister said he expects "significant movement" among small and mid-size employers to drop group health coverage and give employees money to buy their own insurance once guaranteed coverage required by the U.S. health overhaul goes into effect in 2014.

Humana, which already focuses on individual consumers in its large Medicare Advantage market for seniors, is "moving our DNA ... toward the individual relationship," the CEO said. Industry-wide, the group health insurance market isn't a growth area, he said.

-By Dinah Wisenberg Brin, Dow Jones Newswires, 215-982-5582; dinah.brin@dowjones.com

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