outside office buildings and they can't
satisfy their nicotine cravings by lighting
up on planes and trains, but now smokers
could be getting a break from an unlikely
source.
A glitch involving President Barack
Obama's health care law means smokers
may get at least some relief next year
from tobacco-use penalties that could
have made their premiums unaffordable.
In yet another health care overhaul delay,
the administration has quietly notified
insurers that a computer system problem
will limit penalties that the law says the
companies may charge smokers. A fix will
take at least a year.
Older smokers are more likely to benefit
from the glitch, experts say. But
depending on how insurers respond to it,
it's also possible that younger smokers
could wind up facing higher penalties than
they otherwise would have.
Some see an emerging pattern of last-
minute switches and delays as the
administration scrambles to prepare the
Oct. 1 launch of new health insurance
markets for people who don't have job-
based insurance. Last week, the White
House unexpectedly announced a one-
year postponement of a major provision
in the law that requires larger employers
to offer coverage or face fines.
The smokers' glitch is "a temporary
circumstance that in no way impacts our
ability to open the marketplaces on Oct.
1," Health and Human Services
spokeswoman Joanne Peters said in a
statement.
A June 28 HHS document couched the
problem in technical language:
"Because of a system limitation ... the
system currently cannot process a
premium for a 65-year-old smoker that
is ... more than three times the premium
of a 21-year-old smoker," the industry
guidance said.
If an insurer tries to charge more, "the
submission of the (insurer) will be
rejected by the system," it added.
Starting in 2014, the law requires
insurance companies to accept all
applicants regardless of pre-existing
medical problems. But it also allows them
to charge smokers up to 50 percent
higher premiums — a way for insurers to
ward off bad risks.
For an older smoker, the cost of the full
penalty could be prohibitive.
Premiums for a standard "silver"
insurance plan would be about $9,000 a
year for a 64-year-old non-smoker,
according to the online Kaiser Health
Reform Subsidy Calculator. That's before
any tax credits, available on a sliding scale
based on income.
For a smoker of the same age, the full 50
percent penalty would add more than
$4,500 to the cost of the policy, bringing
it to nearly $13,600. And new tax credits
available to help pay premiums cannot be
used to offset the penalty.
The underlying reason for the glitch is
another provision in the health care law
that says insurers can't charge older
customers more than three times what
they charge the youngest adults in the
pool. The government's computer system
has been unable to accommodate the
two.
The administration is suggesting that
insurers limit the penalties across all age
groups. The HHS guidance document used
the example of a 20 percent penalty for
young and old alike.
In that case the premium for a 64-year-
old would be about $10,900, a significant
cut from the $13,600 if insurers charged
the full penalty.
Younger smokers and older smokers can
still be charged different penalties, but if
the total of premiums and penalties is
more than three times greater for older
smokers, the system will kick it out.
Insurers had not expected such
limitations. Before the glitch popped up,
experts said the companies would
probably charge low penalties for younger
smokers, and much higher ones for older
ones.
"Generally a 20-year-old who smokes
probably doesn't have much higher
health costs than someone who doesn't
smoke in any given year," said Larry
Levitt, an insurance market expert with
the nonpartisan Kaiser Family Foundation.
"A 60-year-old is another story."
It's unclear what insurance companies will
do.
Another workaround for the companies
would be to charge the full penalty to
both younger and older smokers. In that
case, there wouldn't be any savings for
older smokers, and younger ones would
see a big price shock.
Levitt said he suspects insurers will keep
the penalties low to sign up more young
people. That's happened so far in three
states, he added.
But health care industry consultant Bob
Laszweski said he thinks insurers will do
the opposite, hitting young and old with
high penalties. "It's going to throw cold
water on efforts to get younger people to
sign up," he said.
Workers covered through job-based
health plans would be able to avoid
tobacco penalties by joining smoking
cessation programs because employer
plans operate under different rules.
That option is not guaranteed to smokers
trying to purchase coverage individually,
prompting 10 states already to limit what
insurers can charge smokers buying
individual coverage.
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