The Affordable Care Act (ACA) has created a wonderful laboratory for studying the impact of changes in healthcare policy. One of the more interesting papers on the topic appears in the latest Health Affairs (Evidence suggests that the ACA’s tobacco surcharges reduce insurance take-up and did not increase smoking cessation). (You’ll need a subscription to read the full article.)
Health plans can’t charge higher prices to people who are sicker, but they can tack on surcharges of up to 50 percent for tobacco users. States can limit or ban the surcharges, and some do. Not surprisingly, people subjected to high surcharges are a lot less likely to purchase insurance, especially because the way the surcharges work has a very significant impact on their out of pocket costs.
Beyond the headlines, there were several additional findings:
- When smokers faced no, moderate or high surcharges rates of smoking cessation were unaffected
- Low surcharges significantly reduced the degree of smoking cessation
- Young smokers were much more likely than older smokers to be deterred from health insurance coverage by the imposition of surcharges
- Surcharges were typically higher than the extra medical costs incurred by smokers
These findings have some interesting implications:
- If the goal of the surcharge policy is to get people to quit smoking, then it doesn’t seem to be working very well. The least effective approach of all is to impose low surcharges. The authors speculate that the low surcharge smokers may feel they are being fairly charged and therefore don’t have an incentive to change. This is like the parents who are more likely to pick up their kids late from day care when a small fine is imposed
- Surcharges knock younger people out of coverage disproportionately, which may destabilize the risk pools since younger people are generally more profitable than older people
- The rising penalties for not purchasing insurance may not have much effect on smokers who face surcharges. Many low or moderate income smokers will be exempt from the penalties because the premiums –with surcharges– are deemed unaffordable
- Patients with mental health problems are being discriminated against because they have much higher smoking rates than the general population. (I have been making similar arguments since 2007)
The authors mention in passing that high surcharges may encourage people to quit in order to obtain affordable coverage. They also note that the smoking surcharge isn’t always apparent on the exchanges, so smokers may not understand that they are paying more or how much.
I’d like to see the law tweaked to make the financial consequences of smoking more apparent to smokers. Surcharges could be displayed more explicitly, and the bar for being exempt from the insurance coverage requirement could be raised. Exceptions could be made for those with a mental health diagnosis.
These changes won’t necessarily be easy to achieve. Congress so far shows no signs of being willing to improve the law –though that may change if the Democrats retake Congress. Another issue is that tobacco use is generally self-reported for exchange customers, so we don’t know how many people are classifying themselves as non-users when in fact they are not.