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September 9, 2013

State health-insurance exchange plans to make smokers pay 40 percent more for coverage; varied interests object...

Updated 9/11/2013

By Molly Burchett
Kentucky Health News

Supporters of the Patient Protection and Affordable Care Act have touted its goal to provide health insurance to all Americans without discrimination, such as prohibiting insurers from denying coverage due to pre-existing conditions. But it allows them to charge smokers more for it, and the officials running Kentucky's health-insurance exchange plan to do just that.

When Kynect, the state's online insurance exchange, opens Oct. 1, smokers can expect to pay up to a 40 percent surcharge, not far from the 50 percent limit in the law. That has brought objections from a wide range of observers, including tobacco companies and anti-cancer activists, saying it may be well-intended but is unfair and may backfire.

"Ranked No. 1 in adult smoking and cancer deaths, Kentucky should be doing all it can to bring tobacco users under the care of medical professionals. Yet some Kentucky smokers — perhaps many — will still be unable to afford health insurance, even after historic reforms take effect next year," says a recent Lexington Herald-Leader editorial. The state's smoking rate for adults is 29 percent.

Seven states (California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island and Vermont) and the District of Columbia will not charge smokers higher premiums. Connecticut voted against a smoking surcharge for individual policies, saying higher individual rates would disproportionately penalize poor people who tend to smoke.

Surchage critics in Kentucky agree. "This penalty is being applied to the working poor and medically indigent," writes Dr. Kevin Kavanagh, chairman of Health Watch USA, in a Herald-Leader op-ed. "Tobacco use is inversely related to education and income. In Kentucky, 48 percent of adults without a high school diploma smoke. These are the working poor."

Since most smokers tend to have lower incomes, the surcharge could discourage them from signing up for coverage at all because they can't afford it, restricting health care access for those that need it most, critics say. Although people with incomes up to four times the federal poverty level will get premium subsidies on the exchanges, the tobacco surcharge will be added to the final rate, reports Sarah Kliff of The Washington Post.

"The smoker's premium alone will account for 24 percent to 29 percent of his salary not counting deductibles and co-pays," Kavanagh writes. "This policy clearly blocks insurability for the low-income worker." Cigarette makers say the policy amounts to discrimination against smokers, reports Kliff.

The surcharge makes sense from a strictly actuarial perspective, and is supported by the insurance industry because smokers have much higher health costs, reports WebMD Health News. Kentucky's health costs attributable to smoking add up to about $1.5 billion a year, and smoking-caused productivity losses total $2.3 billion a year, says the Centers for Disease Control and Prevention. Read more here:

However, punitive measures like higher premiums have not been proven to reduce smoking, say health organizations opposing the surcharge, such as theAmerican Cancer Society and American Lung Associaton. In addition to being ineffective, higher premiums for smokers could make health insurance coverage unaffordable, leaving tobacco users without coverage for smoking-cessation programs, or any other type of coverage that Obamacare has sought to provide.

"From the longer-term perspective on how to improve people's health and contain medical costs, the tobacco penalty is a policy disaster," says the Sept. 8 Herald-Leader editorial. The Cancer Society says states would see greater public health and economic benefits from increased tobacco taxes, implementation of strong smoke-free laws and the funding prevention efforts, rather than penalizing smokers.

In closing, Kavanagh poses an important question: "Wouldn't it be better to provide these individuals access to the health care system where tobacco withdrawal could be encouraged and assisted and preventative care for other ailments can be provided?" (Read more)

Posted by Molly Burchett at 4:34 PM


Beshear announces rates in health-insurance exchange, says Kentuckians will like them, especially the federal 'discounts'

By Al Cross

Kentucky Health News

Tossing out the first examples of what Kentuckians will pay for required health coverage through the state health insurance exchange that opens Oct. 1, Gov. Steve Beshear predicted yesterday, "The vast majority of people are going to be very excited about what they find. . . . When they check it out, they’re gonna sign up."

Beshear said there has been much speculation about premiums, but little talk about the federal subsidies (he called them "discounts") that the exchange will offer to individuals and households with incomes up to 400 percent of the federal poverty level. He said subsidies will be available to individuals earning as much as $45,960 a year, and to families of four with income as high as $94,200 a year.

Beshear notes that 15 percent of Kentuckians are uninsured (light green in pie chart); at left is
Kynect Director Carrie Banahan; at right is Health and Family Services Secretary Audrey Haynes.Beshear notes that 15 percent of Kentuckians are uninsured (light green in pie chart); at left is
Kynect Director Carrie Banahan; at right is Health and Family Services Secretary Audrey Haynes.

About 15 percent of Kentuckians, more than 640,000, have no health coverage. About 308,000 will become eligible for the Medicaid program, which is being expanded under federal health reform to include people with incomes up to 138 percent of the poverty level. Among the other 332,000, 85 percent of those people will qualify for subsidies, Beshear said, and in some cases the subsidy will be 100 percent.

The subsidies are available only through the insurance exchange, which the state has branded Kynect. The exchange will offer five plans, with premiums based only on age, income, geography, number of people on the plan and how many of them use tobacco.

State's example of bronze plan for a smoker earning $30,000

smokers health cost chartsmokers health cost chartThe tobacco surcharge is 40 percent, which has drawn criticism, but Beshear said a 50-year-old man who smokes and earns $30,000 a year would still pay only $160 a month for coverage under the "bronze" plan, the one with the lowest premiums and highest deductibles and other out-of-pocket costs. Under the plan with the lowest deductibles, he would pay $279.

The bronze plan has a $6,300 deductible. The other standard plans are silver, gold and platinum; their deductibles are 20 percent (called "co-insurance") plus $4,600, $2,500 and $1,000, respectively. The exchange will also offer people under 30 a plan that provides only catastrophic coverage with a "very high deductible" and no subsidy, Beshear said.

Among other examples in the bronze plan, which has a $6,300 annual deductible: A nonsmoking farmer in his mid-50s earning $34,000 a year would pay $47; a family of four with no smokers and $70,000 annual income would pay $403; a 32-year-old single mother with two children and $40,000 income would pay $133.

Beshear offered no average cost, saying “There are too many factors to create an average that would be useful. . .. The bottom line is that families must do some research,” which the Kynect website and call center can help them with starting Oct. 1. He said the plans shouldn't be compared to individual plans offered in commercial market, because “the coverages are so much different.”

One big difference is that under the federal health reform law, all plans must cover prescription drugs, hospital care, maternity and newborn services, mental health and substance abuse services, emergency care, rehabilitative services and devices, laboratory services, preventive and wellness services, chronic disease management and pediatric services. Also, they are not allowed to have any dollar limits on coverage.

The law also bans insurance companies from denying or dropping coverage because of someone's health condition, meaning that "For the first time we’re gonna be able to provide affordable health insurance of every single Kentuckian. . . . This is a historic event in the commonwealth." The federal law requires practically every American to have health insurance.

The plans' geography is based on the state's eight Medicaid regions. Beshear said at least two insurance companies will be offering plans in each region, unlike some states. He said four companies have proposed to offer dental insurance, but those plans are still under review by Kynect and the Department of Insurance, which evaluates them for actuarial soundness.

Humana Inc., Anthem Blue Cross and the new Kentucky Health Cooperative will offer policies for individuals, while Anthem, the co-op, Bluegrass Family Health and United Healthcare will provide employee coverage for businesses. Employers with fewer than 50 workers are not required to insure them, and those with fewer than 25 employees can get tax credits for doing so.


Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Telecommunications at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.
Kentucky Press Association