NCPA - National Center for Policy Analysis

Penalty Could Keep Smokers out of Health Overhaul

January 30, 2013

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, says the Associated Press.

  • The Affordable Care (ACA) allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums starting next January 1.
  • For a 55-year-old smoker, the penalty could reach nearly $4,250 a year. A 60-year-old could wind up paying nearly $5,100 on top of premiums.
  • Younger smokers could be charged lower penalties under rules proposed last fall by the Obama administration, but older smokers could face a heavy hit on their household budgets at a time in life when smoking-related illnesses tend to emerge.

Workers covered on the job would be able to avoid tobacco penalties by joining smoking cessation programs, because employer plans operate under different rules. But experts say that option is not guaranteed to smokers trying to purchase coverage individually.

  • Nearly one of every five U.S. adults smokes.
  • That share is higher among lower-income people, who also are more likely to work in jobs that don't come with health insurance and would therefore depend on the new federal health care law.
  • Smoking increases the risk of developing heart disease, lung problems and cancer, contributing to nearly 450,000 deaths a year.

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 more if a person smokes.

Several provisions in the federal health care law work together to leave older smokers with a bleak set of financial options, says Karen Pollitz, an expert on individual health insurance markets with the Kaiser Family Foundation.

  • First, the law allows insurers to charge older adults up to three times as much as their youngest customers.
  • Second, the law allows insurers to levy the full 50 percent penalty on older smokers while charging less to younger ones.
  • And finally, government tax credits that will be available to help pay premiums cannot be used to offset the cost of penalties for smokers.

Source: Ricardo Alonso-Zaldivar, "Penalty Could Keep Smokers out of Health Overhaul," Associated Press, January 24, 2013.


Browse more articles on Health Issues