Smokers Charged 14% More – Soon 50% More – For Health Insurance

Jan. 28, 2013 - PRLog -- WASHINGTON, D.C. (January 28, 2013):  Smokers are already being charged 14%-22% more for their health insurance than comparable nonsmokers, a figure likely to rise to 50% as provided for under Obamacare as companies try to avoid unhealthy clients, suggests the Associated Press.

        An ehealth survey shows that smokers pay an average monthly premium of  $213, which is 14% higher than nonsmokers, and that female smokers pay a monthly premium of $247, which is fully 22% higher than a comparable premium for nonsmoking women, notes public interest law professor John Banzhaf.

        Under the Obamacare statute, smokers may be charged a premium which is 50% higher – over $5,000 a year more in some cases – than a comparable one for nonsmokers; a provision many point out will help companies to avoid insuring – and then being forced to pay for – those most likely to have very high health care costs.  As an Associated Press [AP] article explains:

         "Millions of smokers could be priced out of health insurance because of tobacco penalties in President Barack Obama's health care law, according to experts who are just now teasing out the potential impact of a little-noted provision in the massive legislation. . . .  
         Although the law prohibits insurance companies from turning away the sick, the penalties for smokers could have the same effect in many cases, keeping out potentially costly patients. . . .
         ‘If you are an insurer and there is a group of smokers you don't want in your pool, the ones you really don't want are the ones who have been smoking for 20 or 30 years,' said Karen Pollitz, an expert on individual health insurance markets with the nonpartisan Kaiser Family Foundation. 'You would have the flexibility to discourage them.'"

        Clearly and quite properly, smoking has being singled out over other health concerns, says Banzhaf, who lobbied for the “little-noted provision in the massive legislation.”

        As the AP reports: "Insurers won't be allowed to charge more under the overhaul for people who are overweight, or have a health condition like a bad back or a heart that skips beats, but they can charge [up to 50%] more if a person smokes."  

        That's because, says Banzhaf, according to a major federal ruling he obtained in 2004, obesity is a "health status" which is protected by law, whereas being a smoking is only a “behavior” entitled to no legal protection.

        Interestingly, there will be strong economic pressure for companies to impose the full 50% smoker surcharge: "Robert Laszewski, a consultant who previously worked in the insurance industry, says there's a good reason to charge the maximum. 'If you don't charge the 50 percent, your competitor is going to do it, and you are going to get a disproportionate share of the less-healthy older smokers,' said Laszewski. "They [the insurance companies] are going to have to play defense.'"

        In lobbying for the smoker surcharge, Banzhaf argued to Congress that it is only fair to charge smokers more than nonsmokers for health insurance because they and their smoking create huge and totally unnecessary costs for our health care system and our economy – over $300 billion a year.  

        So, he says, it's simply a matter of imposing personal responsibility on adults for their own health, something both President Obama and opponents of his reforms argued was necessary to begin bringing down the huge and unnecessary costs of medical care in this country.

        Indeed, failing to charge different rates forces the overwhelming majority of the insured to subsidize the bad choices made by the small minority who exercise their personal responsibility by remaining smokers, Banzhaf argues.

        If, under the Obamacare legislation, insurers can charge older people more for a condition (their age) which they can neither change nor avoid, it's certainly fair to charge smokers more for a condition (smoking) which they can both change and avoid, he says.

        In addition Banzhaf argued to Congress, making smoking more expensive is one of the most effective ways  – and certainly the least expensive way – to reduce ballooning health care costs, since it provides a very powerful and immediate incentive to help smokers do what most already want to do: quit, and thereby slash the health care costs they impose on their insurance company,

        Public education campaigns, cessation programs, and other interventions may help people to quit but cost lots of money, whereas smoker surcharges – like higher cigarette taxes and smoking bans in workplaces and public places – are both more effective at reducing smoking, and cost taxpayers nothing.

        It's also becoming clear, he notes, that trying to reduce health care costs by just tinkering around the margins – e.g., by digitizing medical records, or using novel reimbursement schemes or better protocols for treating diseases, etc. –  can bring down medical care costs only marginally, and that the only significant savings come from preventing diseases.

        It's always much less expensive to prevent diseases like heart attacks, strokes, cancers, etc. in the first place than to find slightly more efficient ways to treat them once they have occurred, he notes.

        In short, if we wish to reduce the largest single preventable and unnecessary expense and drain on our entire entitlement system, we have to start getting serious about smoking and smokers.

JOHN F. BANZHAF III, B.S.E.E., J.D., Sc.D.
Professor of Public Interest Law
George Washington University Law School,
FAMRI Dr. William Cahan Distinguished Professor,
Fellow, World Technology Network,
Founder, Action on Smoking and Health (ASH)
2000 H Street, NW
Washington, DC 20052, USA
(202) 994-7229 // (703) 527-8418
http://banzhaf.net/ @profbanzhaf