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Smokers Rejoice! Latest Obamacare Glitch Forces Non-Smokers To Subsidize Your Health Coverage

July 13, 2013

By Avik Roy

Under Obamacare, in theory, insurers aren’t allowed to charge different rates to different people based on their future health risks, with two exceptions. First, they can charge somewhat more to older folks than they can to younger ones; and second, they charge 50 percent more to smokers. However, thanks to a “system limitation” at the Department of Health and Human Services, insurers will not be able to apply the surcharge to older smokers, at least for one year.

Section 1201 of the Affordable Care Act requires that insurance plans sold to individuals or small companies can only vary their premiums by age (they can charge their eldest customers 3 times what they charge their youngest ones) and by tobacco use (they can charge smokers 1.5 times what they charge non-smokers).

HHS can’t walk and chew gum at the same time

However, for unknown reasons, the Department of Health and Human Services couldn’t figure out how to include both of these provisions into its computer system. For example, if you’re a 64-year-old who has smoked a pack a day for his entire life, in theory, the insurer is allowed to charge you 4.5 times what he charges a 19-year-old non-smoker (3 times 1.5). But the HHS computer rejects any insurance submissions in which anyone is charged more than 3x what the cheapest insured beneficiary pays.

“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,” HHS reported on June 28 in a guidance document for insurers. Carriers who try to charge more than 3x to smokers “will be rejected by the system.”

The glitch was first reported by Ricardo Alonso-Zaldivar of the Associated Press. It is, an HHS spokeswoman says, “a temporary circumstance that in no way impacts our ability to open the [subsidized insurance] marketplaces on Oct. 1.”

Insurers will be forced to charge non-smokers more

Insurance math is pretty straightforward. If you can’t charge smokers more, then you will have to charge non-smokers more to make up the difference. And that is an expensive proposition. 85 percent of all lung cancer deaths are attributed to smoking, according to the Centers for Disease Control. 90 percent of all deaths from chronic obstructive pulmonary disease are caused by smoking. Smokers have 2 to 4 times the risk of coronary heart disease, 2 to 4 times the risk of stroke, and 13 times the risk of dying from chronic obstructive pulmonary disease.

Now, if you’re an Apothecary kind of guy, you’ve already taken this to the next logical step, which is to ask: how can insurers prevent you from lying on the form and claiming you’re a non-smoker even if you are? It’s a good question.

Another good question: Why are insurers allowed to charge somewhat more to smokers, but not to other people engaging in high-risk behavior, like inhaling Doritos, alcoholism, etc.?

There’s no satisfactory answer. In the quest to ensure that the genuinely unfortunate get subsidized health insurance, progressives also created an economic reward for medically irresponsible behavior.

This should have been an easy one

HHS should eventually fix the “glitch” that bars insurers from charging more to smokers. But if they can’t, there will be even more rate shock, and more adverse selection, as younger non-smokers pay up to subsidize older smokers. Healthy people will realize that Obamacare-certified health insurance is a bad deal, and they’ll drop out of the system.

I haven’t built computer programs since my college days, but it just doesn’t seem that hard to design a system that allows insurers to charge more to smokers. And it begs the question: if HHS can’t get the simplest things right, what else could go wrong?

Original Source: http://www.forbes.com/sites/theapothecary/2013/07/13/smokers-rejoice-latest-obamacare-glitch-forces-non-smokers-to-subsidize-your-health-coverage/

 

 
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