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Is the Obamacare smoking penalty working?

Is the Obamacare smoking penalty working?

Posted Nov 17, 2016 by Jenifer Dorsey

A look at the ACA’s tobacco surcharge—what it is and to whom it applies

When it comes to tobacco use and smoking, the Affordable Care Act includes a couple of key provisions:

1.) Tobacco use screening for all adults and cessation intervention for tobacco users are included among the ACA’s preventive services, which are included in all Obamacare plans and are covered at no cost to the insured.[1]

2) While the ACA does not allow insurance companies to deny coverage or increase premiums based on health, medical history or gender, premium rates can be impacted by factors such as a customer’s location, age, plan category, and tobacco use. [2],[3] Insurers can charge tobacco users up to 50 percent more than non-users.[4]

It is clear enough that the law wants to discourage tobacco use, we all have a lot of questions—does the smoking penalty apply to smoking more than cigarettes, does it apply in every state, and is it even working?

Charging smokers more for health insurance is nothing new

Tobacco rating (i.e., charging those who use tobacco more) has been around for a while. Before the Affordable Care Act took effect, nearly all states allowed insurance companies to charge users more.[5] The difference today is that the ACA actually limits this practice.

 

Uninsured smoker?

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Note that supplemental (e.g., medical gap, dental insurance) and short term health plans do not qualify as minimum essential coverage under the ACA, which means you could still owe a tax penalty if you do not meet the individual shared responsibility provision and are not exempt. Also, you can be denied supplemental and short term coverage if you do not meet eligibility requirements.

 

Tobacco use, defined … and what about marijuana and vaping?

So, what exactly constitutes tobacco use? Are you considered a user if you bum a smoke from your buddy a couple of times a year? What if you smoke pot in a state where it is recreationally or medicinally legal?

According to the Tobacco Control Legal Consortium, for the purposes of the premium surcharge, tobacco use is defined as[6]:

  • Using any tobacco product other than for religious or ceremonial use
  • On average four or more times per week
  • Within no longer than the past six months

States may provide an alternative definition of tobacco use and are also allowed to require that tobacco use surcharges be calculated as a share of a consumer’s subsidized premium, resulting in a smaller surcharge.[7]

Those who use or smoke cigarettes, cigars, chewing tobacco, e-cigarettes (i.e., vape pens), and marijuana could be charged more in states that do not prohibit tobacco rating.[8],[9] However, it ultimately depends on the insurance company.

 

 

Which states don’t penalize tobacco users when they buy health insurance?  

In 2014, the following state standards for tobacco rating in the individual market were applied[10]:

  • Tobacco rating is permitted, but the maximum surcharge an insurer may impose is capped at a level less than the federal default: Arkansas (20 percent), Colorado (15 percent), Kentucky (40 percent)
  • Tobacco rating is prohibited throughout the individual market: California, District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, Vermont
  • Tobacco rating is prohibited for plans sold in the state’s marketplace only: Connecticut

In 2015 and 2016, state standards remained the same, with 40 states defaulting to the federal allowable tobacco surcharge.[11],[12]

You can view state tobacco rating ratios at CMS.gov—blank cells indicate a federal default.[13] Though these rating ratios and states may change, it is likely that most states will continue to allow insurers to charge smokers more than nonsmokers in 2017.

 

 

Are Obamacare smoking penalties working?

While the ACA aimed to reduce tobacco use by imposing a surcharge for smokers and providing cessation to help people quit, a Yale study released this summer shows the healthcare reform law may be missing on both counts. Researchers at the Yale School of Public Health found that in the ACA’s first year of implementation, 2014, tobacco surcharge resulted in lower enrollment among smokers, without an increase in smoking cessation.[14]

In 2014, the median tobacco surcharge for 49-year-old smokers living in one of the 43 states that allowed surcharges was $70 per month.[15] Smokers younger than 40 years old faced the highest surcharges and showed a 20 percentage point drop in their likelihood of having insurance coverage compared with those who would not be penalized.[16] As one of the study’s authors noted, this could impact keep younger people who traditionally have lower healthcare costs out of the risk-pool.[17]

If you have questions about health insurance and tobacco use or need help finding coverage, call the number at the top of your screen to speak with a licensed health insurance producer.

 

Originally posted August 16, 2016.



[1] HealthCare.gov. “Preventive Care Benefits for Adults.” Accessed Aug. 9, 2016. https://www.healthcare.gov/preventive-care-adults/

[2] HealthCare.gov. “How Insurance Companies Set Health Premiums.” Accessed Aug. 9, 2016. https://www.healthcare.gov/how-plans-set-your-premiums/

[3] Ibid.

[4] Tobacco Control Legal Consortium. “How the Affordable Act Affects Tobacco Use and Control.” Last updated March 2014. http://www.integration.samhsa.gov/health-wellness/How_the_Affordable_Care_Act_Affects_Tobacco_Use_and_Control.pdf

[5] Giovannelli, Justin, et al.“Insurance Premium Surcharges for Smokers May Jeopardize Access to Coverage.” To The Point. Jan. 13, 2015. http://www.commonwealthfund.org/publications/blog/2015/jan/insurance-premium-surcharges-for-tobacco-use

[6] Tobacco Control Legal Consortium. “How the Affordable Act Affects Tobacco Use and Control.” Last updated March 2014. http://www.integration.samhsa.gov/health-wellness/How_the_Affordable_Care_Act_Affects_Tobacco_Use_and_Control.pdf

[7] Giovannelli, Justin, et al.“Insurance Premium Surcharges for Smokers May Jeopardize Access to Coverage.” To The Point. Jan. 13, 2015. http://www.commonwealthfund.org/publications/blog/2015/jan/insurance-premium-surcharges-for-tobacco-use

[8] Andrews, Michelle. “E-Cigarette Users May End Up Paying More for Insurance.” Kaiser Health News. http://www.npr.org/sections/health-shots/2014/05/20/314228497/e-cigarette-users-may-end-up-paying-more-for-insurance

[9] FreeAdvice Legal Staff. “What If the Insured Lied About His Smoking?” http://law.freeadvice.com/insurance_law/life_insurance_law/insurance_lie_smoke.htm

[10] Giovannelli, Justin, et al.“Insurance Premium Surcharges for Smokers May Jeopardize Access to Coverage.” To The Point. Jan. 13, 2015. http://www.commonwealthfund.org/publications/blog/2015/jan/insurance-premium-surcharges-for-tobacco-use

[11] Kansas Health Institute. “Issue Brief: States Vary on Higher Premiums Paid by Tobacco Users Under the ACA.” Sept. 2015. http://www.khi.org/assets/uploads/news/13870/tobaccosurcharge_final.pdf

[12] Centers for Medicare & Medicaid Services. The Center for Consumer Information & Insurance Oversight. “Market Rating Reforms: State Specific Rating Variations.” Last updated Feb. 26, 2016. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/state-rating.html

[13] Ibid.

[14] Greenwood, Michael. “ACA’s Tobacco Surcharges Reduce Smokers’ Insurance Take-Up, But Do Not Increase Smoking Cessation, Study Finds.” Yale School of Public Health. July 7, 2016. https://publichealth.yale.edu/news/article.aspx?id=13049

[15] Mangan, Dan. “Obamacare’s Smoker Penalty Dampened Insurance Enrollment, Didn’t Help Quitting.” CNBC. July 6, 2016. http://www.cnbc.com/2016/07/06/obamacares-smoker-penalty-dampened-insurance-enrollment-didnt-help-qutting.html

[16] Smoking Cessation, Study Finds.” Yale School of Public Health. July 7, 2016. https://publichealth.yale.edu/news/article.aspx?id=13049

[17] Ibid.

About The IHC Group
Independence Holding Company (NYSE: IHC) is a holding company that is principally engaged in underwriting, administering and/or distributing group and individual disability, specialty and supplemental health, pet, and life insurance through its subsidiaries since 1980. The IHC Group owns three insurance companies (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company) and IHC Specialty Benefits, Inc., which is a technology-driven insurance sales and marketing company that creates value for insurance producers, carriers and consumers (both individuals and small businesses) through a suite of proprietary tools and products (including ACA plans and small group medical stop-loss). All products are placed with highly rated carriers.

IHC Specialty Benefits, Inc.
IHC Specialty Benefits, Inc., doing business as Health eDeals Insurance Solutions is a full-service marketing and distribution company that focuses on small employer, individual and consumer products. Health eDeals markets products via general agents online, telebrokerage, advisor centers, private label and directly to consumers. For more information about Health eDeals visit http://www.HealtheDeals.com.