States opt for lower smoking fees

The Affordable Care Act (ACA) allows insurance companies to charge smokers up to 50% higher premiums than nonsmokers. However, this study found that most insurance companies are charging much less than the 50% maximum surcharge allowed.

All states included in the study offer at least one plan with a less than 50% surcharge, and 89% of plans overall charge less than 50%. Many states (41%) have at least one plan with no tobacco surcharge at all.

The states that legislated tobacco surcharge rules lower than the 50% maximum allowed by the ACA are all expanding Medicaid, and all are running state exchanges (with the exception of New Jersey).

Fifteen states were excluded from the study due to lack of available information about their tobacco surcharges. All of these excluded states are using federal exchanges, and only two of them are choosing to expand Medicaid, indicating that this study may be biased toward states that are more invested in the ACA.

The different premiums charged in different states seems to have no connection to the rates of smoking in individual states. The nationwide smoking rate is 19.8%. The 6 states (and the District of Columbia) that have chosen not to allow any tobacco surcharge all have smoking rates less than the national average. Similarly, the states with plans charging 30% or greater all have less than national average smoking rates with the exception of Maine (20.3%).

Presumably, the motivation for the tobacco surcharge is an assumption that smoking causes higher health costs, and unlike other preexisting conditions such as cancer, people can choose to quit smoking. Although a large body of evidence ties smoking to increased risk of cancer, heart disease, and many other health problems, this study actually found that smokers had lower health costs than non-smokers until they were over 60 years old, and even then they only spent 13.7% more.

The only remaining benefit of a surcharge might be to encourage smokers to quit, but they are probably more likely to be encouraged not to enroll. This is especially relevant since smoking is more prevalent for poor people, with a 27.9% smoking rate for those below the federal poverty level versus 17% for those above the poverty level.

Abstract

Beginning in 2014, federal guidelines for health plans sold to people in the individual market allow insurers to charge tobacco users up to 50 percent more for premiums, compared to nonusers. We examined variations in tobacco surcharges for plans offered through the state and federal health insurance exchanges, or Marketplaces. The plan with the median surcharge had only 10 percent higher premiums for tobacco users compared to nonusers, and nine in ten plans charged a lower surcharge than allowed. Even with such lower-than-allowed surcharges, tobacco users lacked affordable coverage – defined as access to at least one plan with premiums of less than 8 percent of income after subsidies – in more states than did nonusers. Higher premiums could encourage tobacco users to opt out of coverage. Our results also suggest that the variation in tobacco surcharges may result in the sorting of tobacco users and nonusers into different plans. PMID: 25092850 — Kaplan, CM et al. Health Affairs. 2014; 33 (8): 1466-73.