Friday, March 1, 2013

Smoking Could Cost You More With The Affordable Care Act In Place

The cost of cigarette smoking and other forms of tobacco use are well known, both in terms of effect on a smoker’s health and the rising cost of tobacco products. There can be no disputing the fact that smoking is injurious in more ways than one and can be lethal. However, this has not stopped the almost one in five Americans who still smoke regularly. Now, because of the tobacco use penalties that are present in the President’s health care law, the impact of smoking on their pockets will be even more severe.

Obamacare has a few little noted provisions that are only now coming to light and the impact of which are still being assessed. Among these is a provision that allows health insurers to charge individuals who smoke up to 50% more in their health insurance premiums. This will kick in from January 1 next year. While the exact nature and amount of the penalties will vary from case to case, a ball park estimate is possible. In the case of a smoker who is 55 years old, the additional financial burden by way of increased health insurance premiums will be in the range of $4,000 plus a year. For a smoker who is 60, the impact could be substantially higher – around $5,000 per year.

Since the increase in premium amounts is age related, younger smokers will pay less by way of the “smoking penalty.” This reduces the effective financial deterrent at the age when the habit develops and takes root. However, the impact is expected to be massive on older smokers because the high penalties appear at the age when most smoking related health complications begin to appear and when retirement and living on a fixed income is a fast approaching reality. Add to this the fact that smoking is highest among the lower income section of the population and the total impact of the increased premiums because of smoking becomes obvious.

Those who are covered under job related health insurance plans will be able to avoid the penalties by joining programs to enable them to give up the habit, but it is unlikely that this option will be available to individual policy holders. Additionally, although the law provides for those who are unable to get coverage under the new provisions to buy private healthcare insurance and provides for tax credits to keep the premiums at reasonable levels, this will not help smokers. The tax credits cannot be used to offset the higher premiums that may be charged on account to the insured person being a smoker.

The increase in premiums by up to 50% is a figure whose impact may not be obvious initially. A look at a possible scenario will make clear how huge an impact it will really have. If a person aged 60 years takes a health insurance policy under the new law the cost will be around $10,000 a year. The tax credits that can be availed of will bring this figure down to about $3,000. But the penalties could add another $5,000 to the cost of insurance, making the total $8,000 plus. If that individual is earning $35,000 per year, health insurance will cost him or her around 24% of the annual salary. By this calculation smoking will not just become very expensive, it will be financially unviable.

All those who have been trying to kick the habit and have not been able to succeed now have a huge new incentive to stop smoking. The cost of smoking, direct and indirect, is not a problem to be faced in the future. It is here and needs to be tackled now. And the only way to do this is by stopping.

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