While surcharges unambiguously lead to higher premiums for tobacco users in nongroup markets and thus ought to lead to lower enrollment, theoretically, surcharges could lead to either higher or lower enrollment in employer coverage. Low and modest-income people buying health insurance may qualify for premium subsidies that cover the majority or even all of their health insurance premiums. 2016 Jul 1;35(7):1176-83. doi: 10.1377/hlthaff.2015.1540. Column 1 shows the effect of tobacco surcharges on the differences in insurance rates between smokers and nonsmokers for the full sample of nonelderly adults. Some states have set more restrictive limits on rating for tobacco use, and several states have outlawed tobacco premium surcharges altogether. Rate: 35% of the wholesale purchase price; Both cigarettes and other tobacco products are subject to the 4.5% state sales tax rate plus the general municipal sales tax rates when sold at retail. She is also lead author of the book, Rule the Rules on Workplace Wellness Programs, published by the American Bar Association. [14] However, the state's tobacco age restriction was raised to 21 in December 2019 by federal law. Most exchange plans charge lower tobacco surcharges than allowed, but many tobacco users lack affordable coverage. Banning tobacco surcharges may be more effective than having a very low tobacco surcharge, since even asking about tobacco use during enrollment could have an effect on enrollment independent of the size of the surcharge. To learn more, visit our Employers page, Determining which participants were charged the tobacco surcharge, Determining which participants were reimbursed the tobacco surcharge, Withholding the tobacco surcharge from a participants paycheck and placing it in the health plan trust account; and. (May 13, 2013) On May 9, 2013, that the Executive Yuan (Cabinet) of the Republic of China (on Taiwan) approved amendments to the Tobacco and Alcohol Tax Act and to the Tobacco Hazards Prevention Act that, if they become law, would, respectively, increase the taxes and the health surcharge on tobacco products. Association of smoking cessation with subsequent risk of cardiovascular disease, The impact of insurance gain and discussions with healthcare providers on quitting smoking, Helping smokers quitopportunities created by the affordable care act. Gary Herbert (R) in March 2019, Utah's tobacco age restriction was set to increase from 19 to 20 on July 1, 2020, and to 21 on July 1, 2021. Ten Democratic governors and eight Republican governors signed increases in tobacco age restrictions during this time.[3]. You do not have to pay this surcharge if you attest (respond) that: You and all enrolled dependents ages 13 and older do not use tobacco products. Mokdad AH, Marks JS, Stroup DF, Gerberding JL. Age The health insurance premiums are based on an individuals age, as older people are charged higher premiums compared to younger people. Theoretically, tobacco surcharges could lead to lower premiums for nonusers, which could potentially lead to higher enrollment among that group. Columns 4 and 5 show results when nongroup plan enrollment was split by whether the plan was offered through the ACA marketplaces for the 2019 sample. Compared to those with insurance, uninsured individuals tended to be younger, have smaller family sizes, lower levels of family income and education, and they are more likely to be male and nonwhite. Results showing the impact of the size of tobacco surcharges are presented in Table4. Members Currently Paying the Tobacco Surcharge: If a member is currently paying the tobacco surcharge and does not make an active election during Open Enrollment, the current enrollment will default to the new Plan Year and the member will continue to pay the tobacco surcharge. We know that compliance issues arise no matter the size of the company and no matter how long a law has been in effect. . If people avoid health insurance simply because they cant afford it, then they will also not able to access the coverage for the free tobacco cessation that is included with ACA-compliant health plans. As additional robustness checks, we also examined subsamples including individuals with incomes between 138% FPL and 400% FPL, who are most likely to qualify for subsidies and those older than 25 who no longer qualify for dependent coverage. The outcome variable represents four categories of insurance typeuninsured (omitted), nongroup, employer, and public. Table TableA3:A3: AppendixS1 presents results excluding individuals under 26 and classifying tobacco use as the use of any tobacco product rather than cigarettes only. Tobacco use is the largest cause of preventable disease and death in the United States, Understanding lung cancer screening behavior: racial, gender, and geographic differences among Indiana longterm smokers, Tobacco taxes as a tobacco control strategy. The functionality is limited to basic scrolling. Department of Economics, Generating an ePub file may take a long time, please be patient. Although Freidman et al grouped states into small surcharge, large surcharge, and no surcharge categories, they did not explicitly model each policy component. The inclusion of state fixed effects holds constant any state specific factors that might affect differential insurance enrollment choices between smokers and nonsmokers. , Although state tobacco rating rules typically do not apply to large employers, it is possible that there are spillover effects. Even though federal law permits a tobacco surcharge on health insurance, some states prohibit this. The table presents relative risk ratios from a differenceindifference specification similar to the one presented in Table2 and including all income levels. There has been a flurry of activity lately involving employer wellness programs that impose a tobacco surcharge on health insurance. In these years, adult members of households included in the basic monthly CPS were surveyed in June of the first year (2014 and 2018) and January and May of the second year (2015 and 2019). All regressions are weighted using the appropriate weights from the Current Population Survey. Additionally, recent research has cast doubt on whether small employers complied with either the rating rules or the exemption for tobacco cessation, particularly in the early years of the ACA. To learn more: Call 1-866-NY-QUITS (1-866-697-8487) toll free; Text (716) 309-4688; or. By clicking "Submit", you agree to our Terms of Use and acknowledge our Privacy Policy. Macys offered a tobacco cessation program to employees, but the only way to avoid the surcharge was for the employee to declare that all covered members in his or her family remained tobacco free for a period of six consecutive months during the health plan year. Tobacco Surcharges. States Charging Below 50%:6 Arkansas - 20% Colorado - 15% Kentucky - 40% States Charging the Maximum 50%:7 States Which Prohibit Tobacco Rating Completely:6 California Massachusetts New Jersey New York Rhode Island Vermont Washington D.C. Subsidies and Tobacco Surcharges Reasons for not enrolling in marketplace coverage. Call KT, Davidson G, Sommers AS, Feldman R, Farseth P, Rockwood T. Uncovering the missing Medicaid cases and assessing their bias for estimates of the uninsured, The uninsured and the affordability of health insurance coverage: examining subgroups of uninsured Americans uncovers certain patterns of coverage gaps, but affordability remains a key concern, Response error and the Medicaid undercount in the current population survey, Tobacco product use among adultsUnited States, 20122013, Selfidentified tobacco use and harm perceptions among US youth, Individual Market Rate Restrictions (Not Applicable to HIPAA Eligible Individuals), Survey of NonGroup Health Insurance Enrollees, Health Insurance Exchanges 2020 Open Enrollment Report, Demand for health insurance marketplace plans was highly elastic in 20142015, Premium subsidies, the mandate, and Medicaid expansion: coverage effects of the Affordable Care Act, Demand for health insurance: evidence from the California and Washington ACA exchanges. Under the health reform law, private insurers can charge tobacco users no more than 50% more per month than who do not use tobacco. 13 For example, premium surcharges do not tend . , PMID: 35254928 DOI: 10 . More research is needed to test whether tobacco surcharges decrease premiums for nonusers. This allows us to account for whether the effect is concentrated in the nongroup market or whether there are spillover effects. Benefits Insight. If the program uses a medical test to detect nicotine or tobacco use, it also must comply with the ADA's rules for voluntary wellness plans. , Tobacco surcharges and the state laws that limit them theoretically have varying effects on different segments of the health insurance market. Income eligibility for assistance under the affordable care act: technical memorandum on estimates for nonelderly adults. The nationwide average pre-subsidy premium in 2020 is about $576 per month for health plans sold in the exchange. The https:// ensures that you are connecting to the Some states have made it illegal for insurance companies to implement a surcharge. And in states like California, Rhode Island, Vermont, the District of Columbia, Massachusetts, New York, and New Jersey are not allowed to charge higher premiums from tobacco users. Pesko MF, Maclean JC, Kaplan CM, Hill SC. 5 Individuals are able to report multiple sources of health insurance in CPSASEC. You do not have to pay this surcharge if you attest that: Neither you nor any of your enrolled dependents age 13 and older use . Tobacco use is the largest cause of preventable illness in the United States. , The ERISA wellness incentive laws have been in effect in their current form since 2013, which is a long time to get into compliance. Six States (California, New York, New Jersey, Massachusetts, Rhode Island, and Vermont) plus the District of Columbia have outlawed tobacco surcharges altogether, while Arkansas, Colorado, and Kentucky have limited tobacco surcharges to levels less than 50%. Tech: Matt Latourelle Nathan Bingham Ryan Burch Kirsten Corrao Travis Eden Tate Kamish Margaret Kearney Joseph Sanchez. Ballotpedia features 393,617 encyclopedic articles written and curated by our professional staff of editors, writers, and researchers. State fixed effects were included in columns (2) and (4) include state fixed effects; however, they did not substantially affect the results. CA, It was increased from 18 to 21 in 1911. The site is secure. to not pay the monthly surcharge) for 2023. We used linear probability models with a differenceindifference specification. New Jersey law states: A PERSON WHO SELLS OR OFFERS A TOBACCO PRODUCT TO A PERSON UNDER 21 YEARS OF AGE SHALL PAY A PENALTY OF UP TO $1,000 AND MAY BE SUBJECT TO A LICENSE SUSPENSION OR REVOCATION. Plans in both market segments are allowed to charge enrollees different rates based on the same four factors. Due to a "ObamaCare smoking glitch" where programmers couldn't get the charge to calculate correctly the tobacco surcharge wasn't implemented until 2015 in many states. During the 1920s and 1930s, state laws trended towards a limit of 18 years. , 1865 into law. Further, we included state tobacco policy variables which we calculated from the CDC State Tobacco Activities Tracking and Evaluation System and included state cigarette taxes per pack and a measure of clean indoor air policies that were coded as 1 if the state banned smoking in all indoor bars, restaurants, and private workplaces and 0 otherwise. 1 Research: Josh Altic Due to the sampling design of CPS, all households from CPSASEC can theoretically be linked to the CPSTUS in either January or May of 2015 or 2019. to reimburse all participants who paid the tobacco surcharge from July 1, 2011, to the present (plus interest), to revise its wellness program to comply with ERISA wellness incentive rules, to prevent Macys from collecting tobacco surcharges until it revises tis wellness program to comply with the ERISA rules, to empty all profits received as a result of its fiduciary breaches, and. Proponents of tobacco surcharges argue that higher premiums for tobacco users could lead to lower premiums for nonusers, increase insurer participation, and create an incentive for tobacco users to quit. Each column is a separate regression, and the interaction term between surcharge state and current smoker shows the key differenceindifference coefficient. Thus, it can be said that employers can charge higher premiums from employees using tobacco but they also have to offer a tobacco cessation program, so that employees have the option to avoid the surcharge by participating in the tobacco cessation program. Additionally, the fact that the inclusion of state fixed effects in our model of the impact of surcharge size produced nearly identical results to the same model without state fixed effects gives us confidence that this identification assumption holds. Standard errors, clustered at the state level are shown in parentheses. We also used geographic variation in tobacco surcharges to examine how the size of the surcharge affects insurance coverage, again comparing smokers to nonsmokers. Like the Macys case, this case is still pending. Additionally, after limiting the sample to those most likely to benefit from the marketplace (individuals who did not have insurance through an employer or public program and who had incomes above 138% FPL), we found that the probability that a smoker was enrolled in a nongroup plan decreased by 8.6 percentage points (P=.02) relative to nonsmokers for every 10 percentage point increase in the size of the tobacco surcharge. Directing the third parties regarding how completions of the tobacco cessation programs were reported. Tobacco surcharge has also been prohibited in Connecticut but only for plans that are sold through the states health insurance exchange. All regressions are weighted using the appropriate weights from the Current Population Survey. **Please Note: Nothing contained in this blog post is to be construed as legal advice. 11 9 There is an accommodation made for those it is unreasonably difficult to quit due to medical reasons. Evidence that tobacco surcharges lead to lower takeup of marketplace plans is further bolstered by results from a separate survey of tobacco users. Alternatively, a state may require that the tobacco use surcharge be calculated as a share of the consumer's subsidized premium (instead of from the unsubsidized price, as under the default rules). Comparison of demographic characteristics by primary insurance type for nonelderly adults. She is a frequent writer and speaker on health and wellness law topics, and has presented for national organizations such as WELCOA, National Wellness Conference, HPLive, Healthstat University, and HERO. You also agree that: (i) [InsureMeNow] may share your personal information with its third-party In states with surcharges, enrollment among smokers was 3.4 percentage points lower (P < .01) for every 10 percentage point increase in the tobacco surcharge. Specifically, the employer, a casino, imposed a $50/month tobacco surcharge on health insurance on employees who used tobacco. Box 200130 Helena, MT 59620-0130 Table TableA3:A3: AppendixS1 also presents results splitting the sample by whether family income was above or below 400% FPL, since that is the cutoff for subsidy eligibility and over 90% of marketplace enrollees had incomes less than 400% FPL. Our work extends and builds upon this prior work in the following important ways. The most common options include (i) HSA, HRA or FSA contributions; (ii) a decrease in employee contributions toward medical coverage (often referred to as a tobacco surcharge); and (iii) cash, gift cards or entries into a prize drawing. Download our quit-smoking calendar and tip sheet for creative ideas on how and when to promote quitting tobacco to maximize engagement. All regressions are weighted using the appropriate weights from the Current Population Survey. Each column is a separate regression, and the interaction term between the percent surcharge and current smoker shows the key differenceindifference coefficient. The results from the linear probability models are shown in Table2. Allowing a tobacco surcharge reduced insurance enrollment among smokers by 4.0 percentage points (P=.01). affordable care act, enrollment, health insurance, marketplace, premiums, smoking, tobacco surcharge, Reasons for not enrolling in marketplace coverage. Allowing a tobacco surcharge reduced insurance enrollment among smokers by 4.0 percentage points (P = .01). 8 Additionally, tobacco users in a small business may be able to avoid the penalty by participating in a tobacco cessation program through . County populations were pulled from the 2014 and 2018 American Community Survey annual county level estimates and aggregated up to the rating area level. Premium rating rules for nongroup insurance and small group plans (generally plans provided by employers with fewer than 50 employees) are similar. Because tobacco surcharges are changing over time, this specification also allowed us to include state fixed effects. Marketplace Premiums Rise Faster For Tobacco Users Because Of Subsidy Design. Table TableA1:A1: AppendixS1 presents summary statistics by insurance type separately for the 2015 and 2019 samples. Providing adequate notice about the reasonable alternative standard is also mandatory. Finally, all models adjusted for year of survey (2015 or 2019). to pay the costs the government incurred to bring the lawsuit against Macys. Health Serv Res. Evidence Suggests That The ACA's Tobacco Surcharges Reduced Insurance Take-Up And Did Not Increase Smoking Cessation. [7][8] The tobacco age restriction remained at 19 until federal law raised it to 21 in December 2019. Study design: More Benefits Insight Cafeteria Plan COLA May Require . We compared insurance enrollment in states that did and did not allow tobacco surcharges, using a difference-in-difference approach to compare the policy effects among smokers and nonsmokers. and quitting smoking can significantly improve health outcomes. The Affordable Care Act brought dramatic changes to the individual and small group health insurance premiums still, the use of tobacco by a person can affect the price one pays for the health coverage. Column 4 shows that smokers were 11.5 percentage points (P<.01) less likely to be enrolled in a marketplace plan if they lived in a state with a tobacco surcharge than if they lived in a state without a tobacco surcharge. Smoking cessation programs that include tobacco surcharges need to comply with federal rules for workplace wellness programs. Under a law signed by Gov. A few years back it was discovered by a Health Affairs analysis that more than 16% of the small employers were using tobacco surcharge, and about half of them were not offering a tobacco cessation program. Data collection: In order to focus on health insurance coverage among individuals most likely to be affected by tobacco surcharges, we made several sample exclusions. The Market Rules and Rate Review Final Rule (45 CFR Part 147) provides that each state will have age rating ratios of 3:1 using a federally established age curve, tobacco rating ratios of no more than 1.5:1 and per member rating unless a state requests ratios less than the standard, is a community rating state with uniform family tiers, or allows for averaging . Tobacco products are mostly used by lower-income Americans than higher-income Americans. In addition, 14 percent used . First, there is known overreporting of nongroup health insurance plan participation among Medicaid eligible respondents in survey data including the CPS. Will every state implement a surcharge? Beginning January 1, 2014 health insurance plans and employers will be able to charge up to 50% more. Our approach differs from the tripledifference approach used by Friedman et al, which used pre and postACA implementation as a third difference. This surcharge is considered a tax-sheltered amount for payroll. After calculating AGI, we excluded adults over 65 since they would likely be covered by Medicare. The 2019 ASEC included variables that specifically identify marketplace coverage, so we examined whether the effect is driven by those with marketplace plans using the 2019 data only. It has been more than a century since Utah's tobacco age restriction was last 18. Indiana claims this policy will test whether a premium surcharge will convince smokers to quit, but evidence shows that, instead, it will likely reduce the number of people who sign up for coverage . [4] On December 20, 2019, President Donald Trump (R) signed H.R. Gehr Family Center for Health Systems Science and Innovation, Employer-sponsored health plans can incorporate tobacco surcharges, which can also be up to 50% of the standard premium unless a state has a lower limit (the ACA allows up to a 50% tobacco surcharge for small-group coverage, and Department of Labor rules also allow up to a 50% tobacco surcharge for large employer plans). 28 The federal law gives insurers the right to add up to 50 percent to the cost of individual health care coverage. This table presents estimates from a differenceindifference linear probability model, examining the likelihood of the outcome of interest for smokers in surcharge states. More Mercer posts 2020;55:983992. Over the last few years, adult tobacco use in the state has steadily declined. Tobacco users will pay a surcharge for their health plan coverage beginning July 1, 2022. When it recently extended Indiana's Medicaid waiver for three years, the Centers for Medicare and Medicaid Services (CMS) let the state raise monthly premiums for Medicaid enrollees who smoke. Eight states increased their restrictions under a Democratic trifecta, four increased their restrictions under a Republican trifecta, and seven increased their restrictions under divided government. If the program imposes a tobacco surcharge based on whether participants smoke (or otherwise use tobacco), participants who request an alternative standard must be offered a reasonable one,. Tobacco surcharge may also be incorporated in the employer-sponsored health plans that can increase the standard premium by up to 50% unless a state has implemented a lower tobacco surcharge. (ROC Cabinet OKs [] Descriptive statistics from linked CPSASEC and CPSTUS data pooled across 2015 and 2019. For the purposes of this study, we limited the sample to uninsured individuals (N=519). Employers that are ALEs (i.e., have 50 or more full-time equivalent employees . Instead, the notice materials stated employees would only avoid the tobacco surcharge on a prospective basis. A $25 tobacco use premium surcharge is required in addition to your medical plan premium if you or a dependent (age 13 and older) enrolled on your PEBB medical uses a tobacco product.