Let me say up front that I used to be a smoker and I remember how hard it was to quit and how many tries it took. But I find it unfathomable that in this day and age, with the mountain of evidence of the health hazards of smoking, that anyone still smokes. That's certainly their right, if they so choose, but my company shouldn't have to pay them to kill themselves.
My argument is not the increased health costs the company faces from smoking employees, it's the cost of their time. My first encounter with this came when I was the Engineering Manager for a design/build firm doing petrochemical and food processing plants. When I took over the department our productivity was below standards and I made many changes to improve it. One change that I tried to make was with the smokers. Company policy let them go out for a cigarette break whenever they felt they needed one. So every 1-2 hours, they would be gone for 15-20 minutes. That's a loss of productivity of as much as 20%. I couldn't change the company policy, but I could change personnel. I did. And the improvement was substantial.
Are you letting your team's productivity "go up in smoke"? What are you going to do about it?