The Affordable Care Act and the Smokers’ Penalty

Under the ACA smokers  buying insurance in the Exchanges will have to pay a 50% “Premium Surcharge.” For a 55-year-old smoker, the penalty could reach nearly $4,250 a year. Does this mean that Americans who smoke won’t be able to afford coverage?

No. In the end, most smokers should be able to get health insurance without paying a stiff penalty.

For one, it’s up to individual states as to whether they want to let insurers charge smokers more. By early April of 2013, Rhode Island, Vermont, Massachusetts and D.C. had voted to eliminate smoking premiums in their health care exchanges:  The American Cancer Society, which is opposed to the surcharge, is working to persuade other states to ban it. (The ACS explains: “We’re anti-smoking, not anti-smoker.”)

I agree with the ACS that the penalty is counter-productive.  If it makes insurance unaffordable for some smokers, this means that they won’t have access to smoking cessation programs, nicotine patches and other drugs that could help them quit.  Keep in mind that most smokers want to quit, and these programs have proved extremely successful.

The good news is that many Americans who are addicted to nicotine will be eligible for Medicaid. In the U.S. 39 percent of adult smokers live below the poverty level. . Many more live below 133 percent of the poverty level. As states expand Medicaid, they, too, will become eligible for the program. Since Medicaid charges no premiums, they will not pay a premium surcharge.

Meanwhile, new research by the George Washington University School of Public Health and Health Services indicates that including comprehensive tobacco cessation benefits in Medicaid insurance coverage can result in substantial savings for Medicaid. The study found that every dollar spent on tobacco cessation program costs resulted in an average program savings of $3.12, which represents a $2.12 return on investment. 

Under the Affordable Care Act all state Medicaid programs are required to cover tobacco cessation medications, beginning in 2014.

Finally smokers who receive health benefits from their employer are likely to find that they don’t have to pay the premium if they join a smoking cessation program.


How Will Age and Gender Affect Your Health Insurance Premiums in 2014?


Below, a guest-post by Kev Coleman,  head of research and data at HealthPocket  I recently stumbled onto his blog, and now read it regularly. Coleman  does an impressive job of crunching the numbers  on health care and health care reform—with some surprising results.  

 Under the Affordable Care Act (ACA)  insurers can charge older Americans up to 3 times as much as they would charge a 20-something for exactly the same policy. That might sound steep, but today, in many states, insurers can charge older customers 5 times as much.  

Some politicians and industry analysts have predicted that because the ACA limits the ratio to just 3:1 (or 300%) , this will would drive up health insurance premiums for younger enrollees, particularly those in their twenties.

To determine the credibility of that prediction, HealthPocket examined over 20,000 premium quotes within the individual & family insurance market for men and women ages 23, 30, and 63.  

 We found that in 14 states the average 63-year-old now shells out more than three times what a 23 year old pays. But in six of those states his premium exceeded what a younger customers by less than 310%.  In other words, in these states the 63 year old is paying just slightly more than he would under the ACA.

Moreover, the typical 63 year old was not paying 4 times as much as the 23 year old in any of these states. The most expensive state for the average 63-year was Delaware, where his premium would be 382% higher. And Delaware is an outlier.  Nationally the difference in premiums between applicants age 63 and applicants age 23 averaged just 260%, making it unlikely that the ACA’s 300% limit on age-adjusted premiums will be a factor that drives younger Americans premiums skiy-high.

However, these averages mask the differences in premiums between men and women. The majority of states allow insurers to offer women and men different premiums even if the women and men share the same age, health status, and smoking status.


[As I have reported in the past, when women buy their own health insurance in the individual market, they must lay out an extra $1 billion a year, simply because they are women. Insurers explain that women cost them more, even if policies don’t cover maternity, because “they are more likely to visit doctors, get regular check-ups, take prescription drugs, and have certain chronic illnesses.” In other words, women are penalized for taking care of themselves. MM]

 HealthPocket’s analysis reveals that female health insurance applicants average higher insurance premiums at age 23 than men of the same age. When comparing 30 year-olds to 23 year-olds, 30-year-old women faced an even higher gender-adjusted premium.

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