Smokers And The ACA Health Care Reform Act

Millions of smokers could find themselves unable to afford health insurance because of tobacco penalties in the ACA health care law according to experts who are beginning to understand the potential impact of a little-noted provision in the massive legislation.

The Affordable Care Act allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums starting Jan. 1, 2014.

Younger smokers could be charged lower penalties but older smokers could face a heavy hit on their household budgets at a time in life when smoking-related illnesses tend to emerge.
A 55-year-old smoker could pay a penalty of nearly $4,250 a year. A 60-year-old could wind up paying nearly $5,100 in addition to their base premiums.

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 have jobs that don't offer health insurance and would depend on the new federal health care law.

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.

Starting next Jan. 1, the federal health care law will make it possible for people who can't get coverage now to buy private policies, providing tax credits to keep the premiums affordable. 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.

The law allows insurers to charge older adults up to three times as much as their youngest customers.  The law also allows insurers to levy a 50% penalty on older smokers while charging less to younger ones. Although government tax credits that will be available to help pay premiums, they cannot be used to offset the cost of penalties for smokers.

Take a hypothetical 60-year-old smoker making $35,000 a year. Estimated premiums for coverage in the new private health insurance markets would total $10,172. That person would be eligible for a tax credit that lowers the cost to $3,325.  The smoking penalty could add $5,086 to the cost. Since federal tax credits can't be used to offset the penalty, the smoker's total cost would be $8,411, or 24 percent of income. That's considered unaffordable under the federal law. The numbers were estimated using the online Kaiser Health Reform Subsidy Calculator.