Come for the politics, stay for the snark.

Meanwhile over at truth Social, the former president is busy confessing to crimes.

You cannot shame the shameless.

Their freedom requires your slavery.

Pessimism assures that nothing of any importance will change.

Wow, you are pre-disappointed. How surprising.

T R E 4 5 O N

Conservatism: there are some people the law protects but does not bind and others who the law binds but does not protect.

Is it irresponsible to speculate? It is irresponsible not to.

Being the leader of the world means to be the leader of peace.

A Senator Walker would be an insult to the state and the nation.

Infrastructure week. at last.

Jesus, Mary, & Joseph how is that election even close?

Not all heroes wear capes.

And we’re all out of bubblegum.

And now I have baud making fun of me. this day can’t get worse.

The republican caucus is already covering themselves with something, and it’s not glory.

A democracy can’t function when people can’t distinguish facts from lies.

Fuck the extremist election deniers. What’s money for if not for keeping them out of office?

Second rate reporter says what?

The words do not have to be perfect.

When do we start airlifting the women and children out of Texas?

Sitting here in limbo waiting for the dice to roll

When your entire life is steeped in white supremacy, equality feels like discrimination.

Prediction: the GOP will rethink its strategy of boycotting future committees.

You are here: Home / Anderson On Health Insurance / Tobacco surcharges by age

Tobacco surcharges by age

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The Affordable Care Act’s individual health insurance markets are priced via modified community rating. Premiums for a given plan in a given area have to the same to any two people of the same age. Premiums are allowed to vary by a factor of 3 for people between ages 21 to 64. Premiums can not vary for medical risk factors with one potential exception. Premiums can vary by 50% for individuals who use tobacco. The rating factor is a function of insurer discretion.

The tobacco surcharge is not eligible for premium tax credits. A smoker whose insurer charges a tobacco surcharge is not able to use premium tax credits to pay that portion of the premium. Therefore, they are not eligible for zero premium plans. The tobacco surcharge is a plausible source of administrative friction. This administrative friction is likely to lead to healthier smokers to not take up insurance and adverse selection to occur.

One of the things I learned last week is that the tobacco surcharge can vary by age. The graph below is from the RATES PUF for 2022 in West Virginia Rating Area 1 for the two insurers that sell plans on Healthcare.gov. Each insurer has a pretty consistent tobacco age curve across their plans (variation at the 3rd and 4th decimal place by age year & plan ID).

Premium surcharge for tobacco use in West Virginia Rating Area 1 for 2022 by insurer for ages 18 to 64.

This is weird and interesting to me. Highmark charges young smokers a de minimas fee that spikes at age 40 and then a steady annual increase to age 50 where is levels off at about 22%. CareSource has a higher initial rate at age 18that has two steps that top off at a younger age and a lower level.

I am curious if there is a strategy here by each insurer to use the variation in the tobacco surcharges to attempt to select and screen for different classes of smokers in the state of West Virginia? I would imagine that CareSource will be relatively more attractive to smokers in their forties or older while Highmark will be much more attractive to younger smokers.  This may be important in states like West Virginia with fairly high smoking rates in shaping their market, but at this point I’m mostly curious and speculating.

Reader Interactions

5Comments

  1. 1.

    planetjanet

    They clearly are not experiencing smoking-related health effects on people in their twenties. Just looks like a pure profit motive to me.

  2. 2.

    Rebecca

    My guess is someone did an actuarial study/vibe check back in the day and then never updated it or thought again about their tobacco factor strategy – has the surcharge % changed since 2014? If anyone brought it up the point was made that it is ridiculously easy to lie about it and there is no actual enforcement mechanism.

  4. 4.

    David Anderson

    @Rebecca: Looking at the 2017 RATE PUF (https://data.healthcare.gov/dataset/2zrn-hv42/data?conditions%5B0%5D%5Bproperty%5D=statecode&conditions%5B0%5D%5Bvalue%5D=WV&conditions%5B0%5D%5Boperator%5D=%3D&conditions%5B1%5D%5Bproperty%5D=ratingareaid&conditions%5B1%5D%5Bvalue%5D=Rating%20Area%201&conditions%5B1%5D%5Boperator%5D=%3D&conditions%5B2%5D%5Bproperty%5D=rateexpirationdate&conditions%5B2%5D%5Bvalue%5D=12%2F31%2F2017%2012%3A00%3A00%20AM&conditions%5B2%5D%5Boperator%5D=%3D) The curve by insurer/age looks to be pretty damn similiar.

     

    And yeah, I completely agree with you that this is likely an old vibe check with little strategy behind it and even less verification.

  5. 5.

    Amir Khalid

    Here in Malaysia the Government is planning to ban all tobacco sales to those born in 2005 or later. I wonder what the enforcement plan is.

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