NCPA - National Center for Policy Analysis

How Should Insurers Treat Tobacco Use?

August 24, 2012

In the status quo, health insurers include tobacco use as part of their ratings process to determine a person's premium. For insurers, not only does smoking indicate bad health, but it also correlates with other high-risk behaviors that insurance companies look at. Eli Lehrer, president of R Street Institute, composed a review of all the relevant research about tobacco and found that not all tobacco use is similar in its health effects.

  • Smoking cigarettes has the worst health effects, as it is the direct cause of cancers, heart diseases and about 14 other fatal conditions.
  • E-cigarettes, which do not contain tobacco, may be healthier. A study by the Journal of Public Health Policy found that few, if any, chemicals in e-cigarettes post any real harm.
  • Snus, according to studies, appears to have lower levels of all smoking related cancers.
  • Similarly, dissolvable tobacco has been shown to significantly reduce risk of contracting diseases associated with smoking.

Researchers are quick to point out that research on other forms of tobacco intake is not definitive because the products have not been out on the market long enough to make conclusive claims.

Insurance companies are inflexible when it comes to using tobacco as part of their ratings -- they see it as you either use tobacco products or you don't. Since Obama's health care law removes and restricts several allowable rating factors, tobacco use becomes a very important marketing factor. However, the new health care law puts a 50 percent cap on the increase of insurance premium for using tobacco.

In lieu of this research, it may behoove policymakers and insurance providers to approach this issue differently. 

  • In an effort to encourage differentiation based on different types of tobacco use, policymakers could remove the 50 percent premium cap for using tobacco.
  • This would allow insurers to accurately assign the right premium for smokers since other rating factors are restricted.
  • Moreover, this would allow insurance providers to reflect the large difference in risks between the different forms of tobacco use so that people that use e-cigarettes, for example, would not have to pay the same premium as regular cigarette smokers.

Source: Eli Lehrer, "How Should Insurers Treat Tobacco Use? A Review of the Research," Heartland Institute, July 12, 2012.


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