Earlier this week, the body charged with implementing Washington D.C.’s Obamacare exchange joined Vermont, Rhode Island, and Massachusetts in prohibiting participating insurers from charging tobacco users higher premiums than what they charge other Americans. Under Obamacare, insurance plans can make smokers pay up to 50 percent more on their premiums than non-smokers. That provision was included for two reasons: First, to help cover the high costs associated with smoking-related illnesses, and, second, to give smokers a financial incentive to quit. But while this approach might appear logical — and just plain fair — there is cause to be skeptical about how effective it will be in discouraging smoking and cutting down on the habit’s resulting health care costs.
Charging smokers more money for insurance isn’t a new concept in American health care. Employers have been doing it for years, as federal regulations before Obamacare’s passage allowed them to charge tobacco users up to 20 percent more on their contributions to employer-sponsored plans. But those fees are supposed to be just one part of the picture, as employers can only assess the tobacco surcharges “if they are tied to a broader wellness program.” Unfortunately, past evidence shows that some employers have used the surcharges as an excuse to shift costs onto their workers, while offering the weakest cessation programs possible.
In a particularly blatant example of cost-shifting, Wal-Mart — the largest employer in America — decided to charge smokers a full $2,000 more than other employees for their coverage. In an effort to discourage premium-gouging, Obamacare stipulates that smokers who are enrolled in a cessation program cannot be levied the full 50 percent surcharge — but the potential impossibility of enforcing that rule and a lack of clear guidance under the reform law regarding wellness and smoking-cessation programs has some public health advocates worried that the it could actually end up encouraging insurers to act in bad faith.
What makes that possibility even more unpalatable — and has, against all odds, united both the tobacco industry and cancer groups — is the disproportionate effect that it would have on low-income Americans. U.S. smoking rates have plummeted from a high of about 42 percent of all Americans in the 1960s to around 21 percent today — but the vast majority of that 21 percent is poor and people of color. So added costs on smoking have a disproportionate effect: In New York, for example, a $4.35 tax on cigarettes has led to low-income smokers spending up to a quarter of their income on tobacco products.
Proponents of the smokers’ surcharge — including the vast majority of non-smoking Americans — might respond that people who use tobacco have made a costly choice that is bad for their bodies and raises the entire country’s health care costs, so they should be held financially liable for their decisions. An increasing number of employers are buying into that argument on an even broader level, as companies like CVS and Whole Foods have instituted various penalties and rewards for employees who weigh more as health care costs rise and employers remain America’s biggest sponsors of health insurance.
But unlike obesity, which employers can visibly observe and easily measure, it’s more difficult to identify whether or not someone smokes. Smokers are supposed to self-report their behavior to their employers and insurers, so it’s easy to imagine that Americans would lie about tobacco use, knowing that they will have to pay an added premium if they don’t. That could lead to an inaccurate public perception of how many Americans smoke. In a similar example, just Thursday, a new report showed that widely-accepted obesity metrics in the U.S. may be substantially skewed by people lying about their weight.
Putting a cost on smoking could also have the unintended consequence of discouraging people who lie about their tobacco use from joining cessation programs, since doing so would reveal their dishonesty.
A truly accurate measure of how effective anti-smoking efforts would not take into account how many people are paying a fine for self-reported behavior, but the actual rate of spending on and consumption of smoking-related medical care. That data doesn’t exist yet, and won’t for the foreseeable future. But the historical evidence shows that using carrots — such as robust cessation programs — rather than sticks in these efforts yields a 3:1 return on investment, suggesting that Obamacare would do well to bolster its incentives for wellness programs.