Smoking, E-Cigarettes, And Health Insurance: What You Need To Know

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In a recent Wall Street Journal blog post, writer Stephanie Armour reported how federal regulators are weighing whether health insurers who participate in Affordable Care Act (ACA) exchanges can levy a tobacco surcharge on e-cigarette users.

“The 2010 health law allows insurers in individual and small group markets to charge tobacco users as much as 50 percent more in premiums,” Armour writes. “But it doesn’t specify whether that includes users of electronic cigarettes, battery-powered devices that turn nicotine liquid into vapor.”

Armour notes that the Centers for Medicare and Medicaid Services is “still evaluating how insurers may treat individuals who use e-cigarettes under the tobacco rating rules,” and that, according to Aaron Albright, a spokesman for the agency, there is no timetable for how long the review will take. This comes after the Food and Drug Administration (FDA) in April proposed the first federal regulations on e-cigarettes.


A ‘Sticky’ Situation

“It’s a very sticky situation,” said Ray Story, chief executive of the Tobacco Vapor Electronic Cigarette Association. “What we’re trying to provide is a product that’s less harmful. You can’t paint it with the same brush as conventional cigarettes.”

Generally — by almost 90 percent of 151 life insurance underwriters anyway — e-cigarette users are considered smokers “and about 40 percent said their company has an underwriting policy with respect to their use, according to a May survey by Munich American Reassurance Co., which provides life and health insurance to U.S. insurance companies,” Armour said. Most classify e-cigarettes as tobacco products.

“We don’t know what the health effects of e-cigarettes are, but we do know nicotine has potential negative effects,” said Mark Skillan, a medical director at Munich American Reassurance.

Greek researchers have found signs of airway constriction and inflammation after short-term use of e-cigarette products, and other studies have also found some risks.


If You’re A Smoker…

The multiple studies in Armour’s report — which you really should read in its entirety — indicate that whether “vape-ing” or smoking real cigarettes, the time to quit is now.

As Kevin Mercadante of the website Term Life Insurance Saver writes, “On average, smokers will typically pay 15-20 percent higher premiums than non-smokers with equivalent demographics and health conditions. If the monthly premium for a non-smoker is $500 per month, it will be upwards of $600 for a smoker.”

When it comes to insuring smokers, Mercadante writes, companies must charge smokers enough to pay for health claims and compensate for the fact that they collect “less in premium revenue since smokers have a higher mortality rate than non-smokers.”

Mercadante continues: “Insurers must build both factors into a smoker’s rates in order to make the funding adequate to cover claims by the insured and a profit for the company at the same time. … Increased premiums for smokers aren’t a flat amount, since there are different levels of smokers. A current smoker will generally pay the highest premium. A previous smoker will pay lower rates than a current smoker, but more than someone who has never smoked. And even if you quit smoking, you will still pay a higher premium based on how long you were a smoker, and how long ago you quit.”


In Summary

If smokers were hoping for some health insurance premium relief by switching to e-cigarettes and other vapor-based products, that hope appears premature. The unfortunate thing about this addictive behavior is that the alternatives like e-cigarettes are still too new to judge as wholly effective. While they may make it easier to transition into quitting, conventional underwriting wisdom shows that you’re a smoker whether you’re “vape-ing” or not, and that will only lead to costlier premiums. To combat this, make quitting a top priority and regain control of your health.

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