ACA Wednesday: Smokers Glitch & how are premiums supposed to be calculated

Good morning.  The government announced the latest glitch.  I will be a little opinionated here, but not about the ACA but on the people implementing the ACA.  The ACA is very simple.  There are only a few variables involved in calculating premiums:  size of family, ages and smoking.  That’s it.  There is no underwriting involved.  Pretty simple, right?  Evidently not.

So, one of the items defined by the ACA is that a person who is older cannot be charged more than 3 times a younger person.  This is a significant piece of the legislation since currently an older person is charged as much as 9 times the amount of a younger person.

Also, the legislation states that insurance companies can charge up to a 50% surcharge for smokers.  So, when you add up (actually multiply) the surcharge for age with the smoker surcharge, old people could be charged 4 1/2 times more than a young non-smoker.  Pretty simple, right?  Evidently not.

The government announced that there are 2 different systems that test for age and smoking status and the 2 are not getting along.  So, if an insurance company has a person in their 60’s who smokes and they try to enter it into the public exchange, the exchange kicks it out saying it costs too much.  So, instead of fixing the problem right away, the government is throwing up their arms and saying it could take a year to fix the problem.  Really?  I think you need to find some new software programmers.

So, now the insurance companies and the states have decisions to make on how to treat smokers.  Some states have announced that they will throw out any smoker surcharges and charge smokers the same amount as non-smokers.  They are putting the spin on this by stating that smokers would have been charged too much, especially young smokers, and thus would have chosen not to get insurance.  This is trying to put lipstick on a pig.  By charging smokers and non-smokers the same, the cost of insurance will go up for healthy non-smokers and thus make it less likely for them to get insurance through the exchange.  Other states have not announced what they will do, but their other option is to charge all smokers the same surcharge.  How this surcharge would be determined is yet to be determined by each state, but could cause young smokers to pay higher premiums that they would have.  Any way you look at it, the intention of the act was to have a smokers pay a surcharge relative to their age, but that will not be the case for 2014.

VERY IMPORTANT:  Just because you will be eligible for a subsidy does not mean that you will pay less on the public exchanges.  This article only applies to PUBLIC exchanges.  Private exchanges will still be able to discriminate based on smoking status as defined under the ACA.  This means that non-smokers may pay less under the private exchanges.

As things change, the government will continue to give me material to write about.  Please contact me if you have any questions.  More to come…


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