Are smokers unable to afford insurance under the ACA?

Q. I’ve heard that under the ACA, smokers have to pay 50% more for health insurance – and that, even if they qualify for a tax credit, the subsidy doesn’t cover the 50% “premium surcharge.” Does this mean that, under the ACA, smokers can’t afford health insurance?

A. The ACA’s tobacco surcharge appears to make sense – particularly to non-smokers – because it helps to spread the increased healthcare costs of smokers across only the smoking population, instead of spreading it across the whole population. But because premium subsidies don’t cover the surcharge, and because a great many smokers have limited income, the surcharge serves to impede access to health insurance for smokers in many states. In turn, that means they don’t gain access to smoking cessation programs offered by health insurance policies, and don’t have access to healthcare when they need it most.

But Medicaid and state-based regulations are improving access to healthcare for some tobacco users.

In the U.S. many adults who smoke are poor: Almost a third live below the poverty level. Many more have income that doesn’t exceed 138% of the poverty level, which is the upper income threshold for adult Medicaid eligibility under the ACA. The ACA’s Medicaid expansion is optional, but 38 states and DC have expanded their coverage so far, extending Medicaid eligibility to adults with household income up to 138% of the poverty level. Since most state Medicaid programs do not charge premiums, they do not pay a premium surcharge (some states have expanded Medicaid with a waiver that allows for small premiums for some enrollees; these premiums do not include tobacco surcharges).

For private health insurance coverage, both through the exchange and outside the exchange, it is up to individual states to decide whether they will let insurers charge smokers more. As of 2022, nine states and the District of Columbia had restricted or eliminated the tobacco surcharge:

Three states have set a maximum tobacco surcharge of less than 50%:

• Arkansas: 20%
• Colorado: 15%
• Kentucky: 40%

Six states and DC have banned tobacco surcharges in their entire individual market:

• California
• District of Columbia
• Massachusetts
• New Jersey
• New York
• Rhode Island
• Vermont

Virginia lawmakers passed legislation in 2022 that would have banned tobacco surcharges as of 2023, but the governor vetoed the measures. So Virginia does still allow tobacco surcharges.

But even in states where tobacco surcharges are allowed, some insurers choose not to add the cost to enrollees’ premiums, or choose to use a premium surcharge of less than 50%.

The American Cancer Society and the American Lung Association, which are opposed to the surcharge, are working to persuade other states to ban it. (The ACS explains: “We’re anti-smoking, not anti-smoker.”)

Workers covered by employer-sponsored health insurance can avoid tobacco penalties by joining smoking cessation programs.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.