Smokers Could Pay Big Bucks For Obamacare

Money cigarette in an ashtray

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Waiting for Obamacare to bring affordable and comprehensive insurance to the masses? Consumers who enjoy the sweet, sweet drag of an American Spirit or Marlboro Red might be waiting in vain.

The Patient Protection and Affordable Care Act, which will mandate that nearly everybody carry health insurance starting next year, will allow insurers to charge smokers at a rate of up to 1.5 times what their non-smoking peers pay.

The increased premium could mean that older smokers could see bills as much as $5,000 more per year. Worse, the credits that the insurance reform offers to help low and middle-income consumers pay for individual plans will not cover any of the cost increase due to smoking.

About 20 percent of adults in the country smoke, although the penalty for younger smokers would be less because they would be paying lower premiums to begin with, and might face lesser penalties. Experts are concerned that the policy could price some older smokers out of health insurance entirely.

States have the option of limiting the smoker premium hike, or eliminating it altogether.

 

Actuarial Sense

In many ways, the higher premiums make sense — smoking is a known cause of a number of expensive, chronic health problems including heart and lung disease and cancer, and nearly half a million people die from smoking-related illness each year.

Professor Ann Marie Marciarille headshot

Ann Marie Marciarille

“Any place in the current system where there’s underwriting, of course the combination of age and tobacco use is going to put up a red flag,” says Ann Marie Marciarille, a professor in health care law at the University of Missouri-Kansas City. However, Marciarille notes, eliminating underwriting for individual insurance plans so everybody could afford coverage was one of the main driving forces behind the ACA in the first place.

“We single out one group, with actuarial relevant habits. But we don’t single out others,” says Marciarille, who wrote more about the issue on the PrawfsBlawg. “The reason smoking is called out is we can’t quite figure out if it’s innate or behavioral. We’re so conflicted that our conduct gets manifest in the way we put the ACA together.”

Since the law only requires people to buy insurance if it would cost less than 8 percent of their income, the full smoker’s penalty could vault some consumers out of the range where they would need insurance or have to pay a penalty.

 

A Fuller Debate

Ultimately, the effect of the increased penalty would almost surely be to keep some smokers out of the insurance market until they reach Medicare eligibility at age 65.

The final consequences of the penalty are yet to be seen, as states decide if they will allow it or not. But one major criticism is that people with lower incomes tend to have higher smoking rates, singling out a group that is in most need of help with insurance.

Moreover, an accountant looking at the issue from a purely disinterested, if somewhat morbid, viewpoint, might point out that smokers tend to die younger and therefore save the country money on entitlement programs that benefit the elderly such as Social Security and Medicare.

The premium hike brings up a number of questions, Marciarille points out. Is the goal to penalize tobacco users, to encourage them to quit, or to save insurance companies money? And if the goal is better health, could that be better accomplished by including smokers in the insurance pool so they have access to a doctor who could help them quit?

“This is a precursor to a fuller debate,” the attorney says. “What other habits and behavioral effects on health are we going to try to police through health insurance markets? Is it the leading edge, or does it end here?”

 

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