Back in January, I looked at the issue of tobacco use and the ACA from a mostly philosophical perspective. But we also wanted to provide a summary of what’s going on here in Colorado with regards to tobacco and the new health insurance policies that are available for 2014. Although the ACA has eliminated the practice of pricing individual health insurance based on medical history, tobacco use can still result in higher premiums at carrier discretion. The ACA allows insurers to charge tobacco users up to 50% more, although states and insurers are free to set lower levels. Six states plus DC have voted to prohibit a tobacco surcharge in the individual market. Colorado did not go that far, but did limit the tobacco rate-increase to a maximum of 15%. Carriers can charge less than that, and many have opted to eliminate the tobacco surcharge all together. So in the individual market in Colorado for 2014, tobacco users can see rates that range from standard premiums to 15% above standard premiums.
Part of the reason that may carriers have opted to ignore tobacco use when setting rates is that the ACA provides some little wiggle room in the definition of “tobacco use.” It’s a bit of a grey area: People are only considered tobacco users if they use tobacco an average of more than four times per week during the past six months, and it’s on the honor system, making it difficult to enforce the higher rates for tobacco users. As a result, a lot of carriers have decided to simply incorporate tobacco use in with all of the other pre-existing conditions that are now being covered with modified community rating and guaranteed issue coverage.
In the past, most carriers in the individual market in Colorado looked at tobacco use within the past 12 months, and very few carriers had any wiggle room in terms of allowing “just a little” tobacco use to be defined differently than two packs a day. So the ACA makes it easier to get non-tobacco rates all around. And Colorado opted for significantly lower tobacco rates than the ACA allows, with many carriers preferring to eschew them completely.