Amid all the publicity around the glitch-filled launch of the Obamacare health insurance exchanges and the accompanying debate over whether the premiums being offered will be low enough to attract enough buyers, one aspect of the story hasn’t gotten nearly the attention it deserves.
Almost anyone who has followed the story knows that Obamacare doesn’t allow people with pre-existing conditions to be denied coverage or to be charged extra; that it limits the price differentials that can be charged to older people versus younger customers; and that it provides government subsidies to those living below 400 percent of the poverty level to help them pay their premiums.
But what’s not well-known is how Obamacare lowers the boom on the 19 percent of American adults who smoke, substantially negating all three of those consumer-friendly features.
Being a smoker is the one pre-existing condition that insurance companies can discriminate against under the Affordable Care Act. In fact, insurers participating in the exchanges can charge a premium of up to 50 percent for smokers.
But the penalty doesn’t stop there: The premium subsidies that Obamacare makes available for the poor and lower-middle class are based on a formula that subsidizes an individual or family so that they do not have to pay more than a certain percentage of their income — out of their pockets — for their insurance. However, under the law, those subsidies cannot be applied at all to pay the 50 percent smokers’ premium. The loss of that subsidy can be a big deal.
Suppose, for example, someone earning $20,000 a year would qualify for a $3,000 subsidy on an insurance plan costing $4,000 a year. This would make his annual cost $1,000. But if he’s a smoker, the same plan might cost $6,000 a year (factoring in the 50 percent surcharge on the $4,000 sticker price). He would still only get a $3,000 subsidy, because the subsidy can’t be applied to the smokers’ penalty. That means he would pay $3,000 out of pocket instead of $1,000.
As a Sept. 11 article in USA Today pointed out, smokers tend to be overrepresented in the lower-income demographic groups and also among the currently uninsured. Both groups are the people most likely to want to buy insurance on the exchanges. So the penalty is likely to affect a significantly higher percentage of exchange customers than the overall 19 percent of American adults who smoke.
In one regard, the policy makes sense. Why shouldn’t those who choose to smoke — and, therefore, are far more likely to need the health care the insurers are promising to provide — pay more? If not, the rest of us would be subsidizing them.
On the other hand, if one views smoking as an addiction, not a choice, then isn’t it just another pre-existing condition?
On the third hand, if the goal of the Affordable Care Act is to protect the most vulnerable by offering them affordable protection, why would we want to discourage smokers — a fifth or more of the population and a group who are exceptionally vulnerable to health issues — from signing up?
Now that the exchanges are open for business it’s time for a full exploration not only of those policy issues, but also reporting from the field on how the penalty is affecting smoker sign-ups. We should also want to know how the penalty is affecting overall premiums and how much of a dent it puts in the Obama administration’s boasts, the week before the exchanges opened, that average premiums are significantly lower than had been predicted. (The administration’s press release and accompanying white paper about all that didn’t include the smokers’ penalties in touting the various state-by-state average premiums.)
Finally, how is the smoking surcharge enforced? What if I’ve polluted my lungs and bloodstream with Marlboros for 30 years but quit smoking the day before I sign up for a plan? Am I a nonsmoker? What if I say I quit but didn’t? Or what if I go back to the habit a month after signing up?
Steven Brill is a Reuters columnist.