[Editor’s note: On Jan. 1, 2014, significant portions of the Affordable Care Act will be implemented. Every Friday until then, Kokomo Tribune will answer common questions about how the changes will affect health care consumers, including the personal responsibility mandate, the expansion of Medicaid, new health care exchanges and more.]
Q: I heard health insurers can charge smokers higher premiums than nonsmokers. Is this true? How much more?
A: There is one pre-existing condition that insurance companies can discriminate against under the Affordable Care Act: smoking.
Insurers can charge smokers more than nonsmokers for their health insurance premiums, said Kathy Young, CEO of St. Joseph Hospital.
In fact, said Jennifer Lyons, a financial planner with Bucheri McCarty & Metz LLP, insurance companies are allowed to charge smokers up to 50 percent more. She said tobacco use is defined as the use of any tobacco product, including cigarettes, cigars, chewing tobacco, snuff and pipe tobacco four or more times a week within the past six months.
“States can mandate a lower surcharge percentage or no surcharge percentage for tobacco use,” Lyons said. “However, Indiana is not one of those states.”
There is some good news for people who smoke, Craig Dunn, financial planner at Liberty Financial, said.
“The good news is that previously, smokers who might have had health conditions that may have prevented them from getting coverage at any cost will now be able to get coverage,” he said.
That’s because insurance companies can no longer deny health coverage based on pre-existing conditions.
Young said the exact premium will depend on a number of factors, including what type of plan chosen, household income and the number of people living in the household.
Reuters reported the penalty for smokers goes beyond the higher premiums. Premium subsidies that the ACA makes available to the poor and lower-middle class are based on a formula that subsidizes an individual or family so they do not have to pay more than a certain percentage of their income out of pocket for their insurance. However, under the law, those subsidies cannot be applied at all to pay increased rates for smokers.
Reuters provided the following 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.
Readers can submit their questions on the Affordable Care Act to Enterprise Editor Ken de la Bastide at email@example.com or by mailing them to Kokomo Tribune, care of Ken de la Bastide, 300 North Union St., Kokomo, IN, 46901.