ACA’s Tobacco Surcharge Undermines Key Goal of ACA

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December 28, 2016 by Harry Stoll

When Obamacare was passed in 2009 I recall thinking to myself that the allowable surcharge for smokers in a health plan was outrageous–up to 50% of a premium could be surcharged, without government subsidy, for tobacco use. This ought to make cigarette smokers kick the habit, I remember thinking to myself.  Consequently, as more smokers kick the habit, we would have a healthier risk pool, I rationalized to myself.  With a healthier risk pool, our health insurance premiums would stabilize or even decrease.  Sounded logical to me at the time.

A study by researchers at Yale School of Public Health reveals an unexpected consequence of the ACA’s tobacco surcharges.  Turns out, high surcharges resulted in lower rates of insurance enrollment among smokers in the first year of the ACA’s implementation by 12% compared with those incurring no surcharges.  What’s worse?  Smoking cessation did not increase.  Both of these effects are at odds with Obamacare’s mission of universal coverage and prevention of disease.

Professor Abigail Friedman, the study’s first author, concluded, “Our findings suggest that high tobacco surcharges undermine attempts to achieve universal coverage, a key goal of the ACA.” Dr. Friedman added, “Moreover, they do not appear to increase smoking cessation, at least in the first year after ACA implementation.”

The researchers found even more striking results among younger adults. In the under-40 age group, smokers facing the highest surcharges showed a 20% drop in their likelihood of having insurance coverage relative to those facing no surcharges.  Considering the ACA’s risk pools have turned out to be older and sicker in practice, any obstacle preventing younger individuals from enrolling in the ACA will hinder the long term viability of the law itself.

“The larger effects among younger smokers are particularly concerning,” noted Professor Susan Busch, the study’s senior author. “This group has lower healthcare costs than older individuals, so their exclusion may reduce the marketplaces’ long-term stability by limiting risk-pooling.”

The study’s results are very important for improving enrollment techniques for the future of health insurance plans. The results show us how critical enrolling smokers is for achieving universal coverage, especially for younger smokers.  The results could inform how states might regulate the size of tobacco-use surcharges.  States may consider restricting or eliminating these surcharges in order to increase insurance coverage.  They may consider utilizing other, more effective, smoking cessation programs to make this population healthier.

The impact of the ACA’s tobacco use surcharge is not only a financial burden to the smokers who are hampered with an up to 50% increase in premium costs, the reluctance of some smokers to pay the surcharge by not enrolling in health insurance will also hinder the health of the insurance marketplace and the financial well-being of the medical providers faced with their care.

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