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Health Insurance Surcharges for Tobacco Users: State and Federal Rules

The ACA allows tobacco surcharges, but some states limit them

A person's tobacco use can play a role in how much they pay for health insurance coverage even though the Affordable Care Act brought dramatic changes to the way individual and small group health insurance premiums are determined.


Insurance companies can no longer base premium on an applicant's medical history (or a small group's overall medical history), and cannot reject an applicant based on their pre-existing conditions or overall health history.

But ACA allows individual and small group health insurers to adjust premiums based on just four factors—geographic location, age, family size, and tobacco use.


Health insurance premiums vary from one zip code to another.

Older people are charged more than younger people, with a cap of three times the rates that apply to a 21-year-old, and smaller premiums for people under the age of 21 (Massachusetts caps age rating at a 2-to-1 ratio, while New York and Vermont do not allow premiums to vary based on age.)

Family size: Each person has their own premiums. A family of five will pay more than a family of three since the additional children will have premiums. But premiums are only added for up to three children under the age of 21, so a family with five children under the age of 21 will have the same premiums as a similar family with three children.

Tobacco users can be charged up to 50% more than people who don't use tobacco.

This article will explain the federal rules that apply to tobacco surcharges, and how some states have modified those rules.

how much they pay for health insurance coverage even though the Affordable Care Act brought dramatic changes to the way individual and small group health insurance premiums are determined.


Insurance companies can no longer base premium on an applicant's medical history (or a small group's overall medical history), and cannot reject an applicant based on their pre-existing conditions or overall health history.



But ACA allows individual and small group health insurers to adjust premiums based on just four factors—geographic location, age, family size, and tobacco use.


Health insurance premiums vary from one zip code to another.

Older people are charged more than younger people, with a cap of three times the rates that apply to a 21-year-old, and smaller premiums for people under the age of 21.1 (Massachusetts caps age rating at a 2-to-1 ratio, while New York and Vermont do not allow premiums to vary based on age.)2

Family size: Each person has their own premiums. A family of five will pay more than a family of three since the additional children will have premiums. But premiums are only added for up to three children under the age of 21, so a family with five children under the age of 21 will have the same premiums as a similar family with three children.3

Tobacco users can be charged up to 50% more than people who don't use tobacco.

This article will explain the federal rules that apply to tobacco surcharges, and how some states have modified those rules.



Although lawmakers who wrote the ACA felt strongly that a person's health status should not be taken into consideration when setting health insurance premiums, they agreed to allow insurers to charge tobacco users higher premiums.


This decision was controversial: Some believe that it's only fair for tobacco users to pay more for their health coverage, given the toll that tobacco use takes on a person's health and the added costs to treat tobacco-related health conditions.


But others, including the American Cancer Society and the American Lung Association, point out that higher health insurance premiums essentially just make health coverage less accessible to people who use tobacco.


If people remain uninsured because they can't afford health insurance, they're not able to access the free tobacco cessation coverage that's included with ACA-compliant health plans, and they're less likely to receive timely medical treatment when they need it.

What Constitutes Tobacco Use?

Although the text of the ACA includes a provision to allow higher premiums for tobacco users, it does not clarify exactly what constitutes tobacco use.

But a subsequent rule issued by the Centers for Medicare and Medicaid Services defines tobacco use as the use of any tobacco product within the past six months with a frequency of at least four times per week.


Since any tobacco product is counted, this includes e-cigarettes and vaping, as well as traditional cigarettes, cigars, chewing tobacco, and pipe smoking. But the rule excludes tobacco use for religious or ceremonial purposes.

How Much Higher Are Premiums?

The ACA specifically includes an allowable 1.5-to-1 ratio for tobacco use, meaning that individual and small group health insurers can charge tobacco users up to 50% more than non-tobacco users.

Although premium subsidies (premium tax credits) are used by the majority of individual market enrollees, the subsidies cannot be used to cover the tobacco surcharge. Lower-income Americans are more likely than higher-income Americans to use tobacco products.


People with low and modest incomes who buy their own health insurance can qualify for premium subsidies that cover the vast majority—or even all—of their health insurance premiums if they don't use tobacco. But if they do use tobacco, the surcharge can result in unaffordable health insurance premiums for these applicants.

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