Cigarette smokers may want to think twice before lighting up as a provision going into effect next year could mean an up to 50 percent increase on health insurance premiums compared to their non-smoker counterparts.
Although the 50 percent increase is not mandatory, some experts argue that if adopted by insurance companies, it could mean more than just a chunk out of select residents' wallets in a state with soaring poverty and smoking rates.
This provision under the new health care law would have two separate effects — one on employers and the other on the individual market, explained Dinsmore & Shohl attorney and David Whaley.
For businesses, this premium increase comes in the form of a wellness program discount. In other words, people who don't participate in these programs must pay the higher insurance premium.
Under the Affordable Care Act, Whaley explained, the wellness program threshold changed from 20 percent to 30 percent.
Then, the IRS gave the authority to the U.S. Department of the Treasury to increase the smoking premium up to 50 percent.
This isn't the first time there have been discounts for people participating in wellness programs. In fact PEIA started a tobacco premium discount in 2000.
Diane Holley-Brown, communication director with the West Virginia Department of Administration, explained that along with the non-tobacco user discount, PEIA also originally used a tobacco Quit Line. However, this later changed to cover two physician or nurse practitioner visits with a 12 supply of therapy.
This includes nicotine withdrawal therapy, Chantix or Zyban with the applicable copayments. She said nicotine patches do not have a deductible or copay.
In this year's open enrollment, policyholders will submit their tobacco status. For policy holders who answer "no" to tobacco use, the discount would amount to $25 a month for a single policy. For a family plan, if the policy holder answers that neither they nor their dependents use tobacco, that discount is $50 a month.
Again, this provision allows for insurance company to increase the premium. However, it is not required that they do so. That's why in PEIA's case, there will be no change to current rates.
Whaley said the rationale for employers is to offer better smoking cessation programs. In the past, the program involvement ranged from cessation DVDs to weekly classes.
Whaley said the weekly classes were expensive for employers to offer because many people who participated had no intention of quitting.
"So you could go to class on Monday, learn about the evils of smoking and go outside and smoke again when you're done," Whaley said.
The idea is that with this 50 percent extra, there will be enough money at play for employers to sponsor and pay for good smoking cessation programs and inspire others to quit, Whaley said.
"It's a lot of effort to quit so it will ferret out people who would participate without actually quitting," he said. "Individuals who want to quit will but those who don't will pay increased premiums."
Keep in mind, Whaley said, this is only for employers who offer wellness programs. So, an employer can't up and decide to increase premiums without offering some sort of program.
Whaley used the example of the total cost for a single insurance product as $300 a month— the employer would pick up $200 of that total cost while the employee would pick up $100 a month. However, if that employee smoked and didn't want to participate in the program that 50 percent wouldn't increase on the $100 the employee is paying. It would increase from the entire insurance product — the $300.
That means, that tobacco user could end up paying as much as $250 a month, Whaley explained.
"If a person participates you don't get that increased money. You only get the money for those who don't participate. … At 50 percent, more people are paying for it and it will be large enough to fund a good program for those who want to quit," Whaley explained.
Whaley said most of the time it's an annual election, where during open enrollment, the policy holder would answer whether they use tobacco.
In other words, the policyholder would have to know what premium they're going to pay when they make that election once a year.
So, even if they complete the wellness program the third month in, it's not going to amount to an automatic decrease. He said wellness programs typically run in accordance with open enrollment.
"You would pay that increased premium the whole year, even if in the middle of the year, you satisfy that wellness program," Whaley explained.
Some places allow policyholders to make mid-year changes if there is a substantial modification of the premium amount.
However, some debate whether this substantial modification is through an employer action or through the employee action. Whaley said some will argue that it's through employer action because it's the employee's choice to quit smoking.
THE INDIVIDUAL MARKET
For those looking to buy insurance from a broker or the exchange, the process can be a little different.
In that same example of the $300 a month total insurance product, Whaley said it could go up to about $450 a month for that person.
"You're still better off in the employer market," he said.
And recent news suggests that the individual market side may also have to offer some sort of wellness program before enacting that 50 percent increase, Whaley said.
"Wellness programs are not quite developed in the individual market," he explained. "The individual market providing some type of wellness program to charge more for smoking has not been fleshed out. Wellness programs are usually employer provided, not insurance provided. That's not fleshed out but there may be some ability for them to also run their premiums back down to non increased amount in wellness program."
Whaley said now, the individual market can be community rated, which means smoking allows them to charge an increased amount and then charge in the community rated system.
However, the jury is still out on what effects it will have on the individual market.
"Your medical conditions do not drive costs but the cost of the community as a whole will drive cost," Whaley explained.
This has some experts concerned, especially with West Virginia's elevated smoking and poverty rates.
Kanawha-Charleston Chief health officer Rahul Gupta explained the Mountain State ranks top in the nation for smoking.
"We know that prevalence in tobacco is huge in poorer underserved populations," he said, noting the change in 2014 allow insurance companies to adjust premiums for individual versus family enrollment, geographic area, age and tobacco.
For geographic area, Gupta said the worry is insurance companies could charge certain areas more because it's a sicker population.
"We're going to have higher rates of insurance premiums in the private market than we're going to have in surrounding states," he said. "That's not a good thing."
With that concern comes another one in the form of adverse selection, Gupta said.
"What that means is people selecting themselves out of the market and we're only left with the sickest population where rates would go higher. It's a downward spiral. The sick people stay in and the healthy people go out. As they leave, the sicker people's insurance premiums go up and you're rated out of the market. … If in West Virginia, you're also more able to be poor but if you're poor and uninsured, it can happen that you're not able to afford even on the state exchange."
Another argument is that people who use tobacco tend to be poor so they couldn't afford insurance.
Whaley said he's heard both sides of the argument and said it depends on whether smoking is hardwired into a person's genetics or whether it's simply a choice.
"The other factor is that smoking is a choice and not an addiction and not akin to a drug, which would essentially have the opposite because people who do not have the money could switch it off and pay the lower premium," he said. "A lot of it turns on how much smoking is a trait—based on genetics that you are predisposed to smoke or unable to quit or how much of it is totally a choice. Which side you fall on the debate depends on whether there will be an increase for smokers' premiums will drive people away from the market or toward healthier habits."
As far as communities carved to contain sicker versus healthier geographic areas, Whaley said it's hard to determine what will happen.
"It potentially gets back to how good the health care situation is in that area," he said. "I'm leery of taking judgment that this is clearly going to happen. We've been proven wrong with what we thought three years ago. It's interesting to see using mistaken beliefs from the law to apply that to see what we think will happen."
A WAY OUT?
Recently, Washington D.C. declared that smoking was a preexisting condition. So therefore, insurance companies could not charge a higher rate for tobacco users.
Jill Rice, another attorney at Dinsmore & Shohl, said California has enacted this as well.
"Whether West Virginia has considered a bill to do that, it doesn't look like they have," Rice said, later adding. "West Virginia can pass legislation that insurers can't charge more under the Affordable Care Act. They have the ability to do that."
This is where it gets tricky.
Whaley said he anticipates employers would be preempted by ERISA, so generally, state laws couldn't tell an employer what they have to do in connection with delivering health care to their employees.
"The belief is that you may see courts not extend that preemption to such an argument but we've never seen them litigated," he explained. "That would probably be new ground but the employer side would be preempted by ERISA."
So, states could regulate the insurer for sale to the market and to the employer but the employer isn't regulated in providing that product to employees.
"The employer could argue adoption is preempted. States could challenge it but case law says it could lose," Whaley said.
Gupta is skeptical of this.
"So we are equating tobacco use with our children suffering from things like autism or some type of chronic debilitating diseases that people have no control over? This is not true because in the case of a lot of diseases, preexisting conditions, like cancers, people don't have any control over it. … This seems like a perversion of the rules in a way to encourage people to stay on tobacco."
Health experts debate on whether this possible increase would help people quit smoking.
Chantal Fields, vice president of mission for the American Lung Association of the Mid-Atlantic, said these surcharges are not effective in discouraging smokers.
"I don't know if maybe it's because the extra premium isn't what an extra tax would be and they don't see that immediately," she said. "If you raise the tobacco tax by $1 a pack, you immediately see that on your purchase. It not only encourages adults to quit smoking but it also tends to be a way to stop kids from even trying because it's so expensive."
Fields said other policies like increasing tobacco taxes, enacting more smoke-free laws, funding tobacco control programs and making programs more accessible through health insurance coverage and Quitlines, would have a greater effect.
According to the American Lung Association's web site, the association further argues these increased costs could cause tobacco users to be uninsured.
"This would leave tobacco users without coverage for treatment that will help them quit but they also will not have coverage any tobacco-caused illnesses that arise. Their families may also remain uninsured," the site reads.
Rice said the rationale is to create an initiative to quit smoking and the ACA tends to address that, noting the Centers for Disease Control estimates smoking costs the nation $96 billion in direct medical expenses and $97 billion in lost productivity a year.
Gupta said in order to reduce tobacco usage over time, there needs to be a comprehensive plan to approach it.
"That's the thing. Whether it's tobacco cessation in the form of disproportionate insurance premiums, tobacco taxes, advertising and counter advertising the benefits of access programs, all of these things have to happen in a comprehensive manner. … The rates are bad not because we don't know how to fix it. It's just that we need to have a comprehensive strategy. It's already out there. We just need to find a way to be committed on implementing it."