Should You Pay Higher Insurance Premiums When You Smoke

Obamacare, also known as The Affordable Care Act, will allow health insurers to increase individual policies by up to 50% for those who smoke. This could raise the premiums by almost $5000 a year more for smokers. Is that fair? 

When an individual is purchasing a life insurance policy or car insurance, their past behavior or record is taken into consideration when determining a premium. Anyone who obtains life insurance realizes that if they are older, have poor health or engage in risky behavior (such as sky diving) they will have higher premiums. Also, if you have caused accidents while driving, your car insurance premium will be higher. The same should apply for health care insurance. When you engage in behavior like smoking that increases your chances for health care issues and costs, it is only fair that the premiums be higher.

But what is a fair increase in premiums for smokers? Life insurance can calculate when smokers are more likely to die and then adjust the life insurance premium accordingly. It is much more difficult to calculate the actual health care costs caused by smoking because of many other factors affecting the cost of healthcare such as diabetes, obesity, heart disease and age. For example, a Dutch study in 2008 concluded that smokers had lower national healthcare costs than obese or healthy individuals mainly because they lived a shorter amount of time. Smokers on the average lived to 77 years of age, obese individuals lived to an average of 80 and healthy non obese, non-smokers lived until the average age of 84. Therefore, living longer costs society more in overall healthcare costs than a behavior which causes them to live 4 or 7 less years.   

Now, our healthcare system is not a national healthcare system like the Dutch and therefore, it cannot be public policy to hope that individuals die sooner so the costs of their overall healthcare are lower.     Our founding fathers’ principles stated that we are a nation of individuals who determine how we are governed and that the individual’s freedom and liberty will be the dominant force not the government’s view of what is best for society. So, there should be no exclusion to obtaining health care insurance, but more costly behavior such as smoking and overeating should have higher premiums, at least until one is on Medicare. When one is receiving Medicare benefits, age becomes the most important factor in determining premiums, since most (over  75%) of healthcare costs in one’s lifetime is in their last year of life. It is difficult to predict when the last year of life will be, but we know that that the average age expectancy in the US is now close to 78 years; so premiums should be higher after that age.

Therefore, it is fair to increase premiums for smokers until they are Medicare eligible? 50% higher premiums are too high. A study should be done to determine more precisely how much more smokers and other controllable risk factors (those that are modifiable by one’s behavior) cost the health care system and then adjust the premiums accordingly. Most likely it will be closer to 20% than 50%, but we need more data to determine fairer numbers for insurance premium hikes.    A  better strategy  is to  incentivize individuals to take smoking cessation measures to maintain lower premiums and to give tax benefits to employers who incentivize their employees by lowering their health care deductibles when they do not smoke, keep a BMI under 30, maintain their BP under 140/80 and their LDL Cholesterol under 130. These incentives for positive behavior changes are a more effective long term strategy for decreasing the healthcare costs in our nation than solely relying on punitive measures by raising premiums.

There are some simple measures in order to try to keep our nation healthier and keep down the costs of healthcare in our nation. It needs to be a multifaceted approach with strategies to both penalize bad behavior with increased premiums and incentivize good behavior with tax breaks and lower costs. But, we can no longer afford to ignore the real costs of healthcare involving the care of an individual in the last year of their life. There are practical solutions to this issue which I will address in the next blog.