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Smokers may get break on health insurance due to computer "glitch"

Teresa Tanoos's picture
Smokers may get temporary break due to Obamacare glitch

Smokers may be getting a break, thanks to Obamacare. A glitch in the new health care law means smokers could get some relief next year from tobacco-use penalties, which otherwise might have made their health insurance premiums too expensive.

It all has to do with a computer system problem that the Obama Administration has quietly informed insurers will take at least a year to fix. This second delay in the federal health law will limit penalties that companies may charge smokers.

The first delay was also released quietly on July 2 when, in a surprise move that seemed to catch everyone off guard, the White House unexpectedly announced a one-year postponement of the mandate requiring larger employers to cover workers or face fines.

Obama gives employers extra year to provide health insurance

Meanwhile, speculation is growing that these last-minute delays reflect an emerging pattern as the White House races to launch the new health exchanges on October 1. The exchanges are essentially online marketplaces for people who don't have job-based insurance, and they are just one of the many reforms that are scheduled to go into effect by January 1, 2014.

In this latest delay involving a computer glitch, older smokers stand to benefit the most while younger smokers may end up facing higher penalties. It all depends on how the insurers respond to the year-long delay.

According to a statement released by Joanne Peters, Health and Human Services spokeswoman, the smokers' glitch is "a temporary circumstance that in no way impacts our ability to open the marketplaces on October 1."

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In a document from the HHS on June 28, the computer problem is explained in technological terms: "Because of a system limitation ... the system currently cannot process a premium for a 65-year-old smoker that is ... more than three times the premium of a 21-year-old smoker."

The document goes onto state that if an insurer tries to charge more, the submission “will be rejected by the system."

Regardless of the delays, when these provisions do go into effect in 2014, health insurance companies will be required to accept all applicants, including those with pre-existing medical problems.

While this is good news to many, it also means that insurance companies can charge smokers up to 50 percent higher premiums in an effort to prevent insurers from taking on potential risks; thus, the price for the full penalty could be cost-prohibitive for older smokers.

Why, you may ask? Because at the root of the computer problem is another provision in Obamacare that says insurers can't charge older adults more than three times what they charge the youngest adults in the pool.

In other words, the government's computer system doesn’t have the ability to accommodate both groups. Different penalties can still be charged to older and younger smokes, but if the combined cost for premiums and penalties is more than three times greater for older smokers, the computer system won’t be able to process it.

No one, especially the insurance companies, had anticipated these limitations – and prior to discovering the problem, experts predicted insurers would likely charge much higher penalties for older smokers, and low ones for younger ones.

"Generally a 20-year-old who smokes probably doesn't have much higher health costs than someone who doesn't smoke in any given year," said Larry Levitt, an insurance market expert with the Kaiser Family Foundation. "A 60-year-old is another story."

SOURCES: 1. Health and Human Services, "States prepare for seamless exchange of health records after disasters" (July 11, 2013). 2. Kaiser Health News, "Employers To Get An Extra Year To Implement Health Law Requirement On Coverage" (July 2, 2013).