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Smokers Paying Less For Some Health Plans Than Expected

The health law allows insurance plans to charge tobacco users as much as 50 percent more for their premiums, but plans on average increased costs for these consumers by significantly less, according to a new study published in Health Affairs.

Researchers found the median surcharge amount to be about 10 percent. Close to 90 percent of plans stayed well below the maximum surcharge, according to the study’s authors. But even still, because tobacco users were still charged more than others, they more frequently could not access affordable health insurance, a situation that the authors said could deter tobacco users from purchasing insurance at all.

Affordable coverage is defined as “access to at least one plan with premiums of less than 8 percent of income after subsidies,” according to the study.  The authors used that standard because the health law exempts from the requirement to buy insurance individuals who do not have at least one insurance option that costs less than 8 percent of income.

Insurers’ pricing may be based on the use of health care services by tobacco users. “It seems as if smokers don’t actually – at least in the age range that the health insurance exchanges are targeting – use 50 percent more in terms of costs for health care,” said Cameron Kaplan, an assistant professor of preventive medicine at the University of Tennessee Health Science Center and the study’s lead author.

On average, smokers appear to use about 10 percent more health care, Kaplan said, so plans for the most part have reflected that in their pricing, a strategy he said makes sense if insurers “want to attract people into their plan.” Though smokers have more health problems than do non-smokers, Kaplan added, tobacco users in the exchange appear, for whatever reason, “to be the people who avoid using health services.”

The surcharges have drawn criticism from groups such as the American Lung Association. It argues that higher costs will discriminate against smokers and preclude them from obtaining coverage.

“No one wants tobacco users to be uninsured – we know they have health consequences,” said Jennifer Singleterry, the lung association’s director of national health policy.  “We certainly want someone who has lung cancer to have insurance.”

The study’s findings suggest the picture is complicated, Kaplan said.

The health law includes federal subsidies to help people at the lower end of the income scale purchase health coverage, but that assistance is calculated based on premium price tags before any tobacco surcharge is factored in. That means, the researchers noted, federal subsides often aren’t enough to make plans affordable – even with the lower-than-expected add-on premium costs.

States vary in the level of surcharge they allow. Of those assessed in the study, six states plus the District of Columbia prohibit any kind of tobacco surcharge; three states allow surcharges smaller than the 50 percent maximum; and 26 allow surcharges of 50 percent.

But of those states, only in Montana did plans have a median difference in costs for tobacco users that hit the 50 percent maximum, the researchers found. Seven other states – Missouri, Ohio, Maine, Nevada, New Hampshire, New Mexico and Nebraska – had median surcharges of 25 percent or higher.

Kaplan added that it is possible rates could converge in coming years, with more insurers bringing their surcharge to around 10 percent of premiums but “there’s a lot of uncertainty” regarding how these extra charges might change.

Though some supporters of the tobacco-user surcharge argue a larger premium could encourage people to quit smoking, so far there’s “really not enough data” to support an argument either way, Kaplan said.

Singleterry agreed.  “There needs to be a lot more research before anyone can determine whether having that surcharge in place” results in smokers quitting, she said.

Because of the variation in surcharges – both across plans and state lines – the researchers also suggested a potential for self-segregation between tobacco users and non-users. Smokers, they argued, could favor plans with lower surcharges, in turn resulting in higher costs for some insurers than others. But because smokers don’t necessarily cost much more to insure than non-smokers, Kaplan said, that kind of sorting wouldn’t necessarily drive plan costs too high.

“In the end it could just sort of be all right,” he said, “because the plans can price this out perfectly.”