The Centers for Disease Control and Prevention has reported that the smoking rate of adults with no more than a high-school-equivalent diploma remains at more than 40%, compared with the rate of only about 15% for all adults, including the less educated.
This is critical because smoking costs our economy an estimated $300 billion a year, with most of those costs now being borne by the great majority of taxpaying Americans who do not smoke, in the form of higher taxe
s for Medicare, Medicaid, Obamacare, etc., and inflated health insurance premiums.
Since a major objection to Obamacare by many Republicans was that it did not impose personal (or individual) responsibility – a policy which, if fully implemented, could have completely funded the entire Obamacare program with no new taxes or fees – it is only logical to expect that the new Republican health plan under President Donald Trump will finally require people to take at least simple steps to reduce their own health care costs, says professor John Banzhaf, who suggests how to begin the process.
In other words, says Banzhaf, while there may be strong objections to requiring persons with pre-existing medical conditions like cancer to pay more for basic health insurance, there should be no similar objections to requiring persons who don’t have such conditions to pay more if they continue to engage in high risk activities as smoking likely to cause such conditions which then imposes those huge medical costs on everyone else.
Banzhaf is the public interest lawyer behind two major personal responsibility plans – one adopted by the National Association of Insurance Commissioners, and the 50% surcharge on smokers currently in effect under the Affordable Care Act – which have proven to be both workable and effective.
It would be much fairer to require those who choose to damage their own health in that way to pay their fair share of these huge added costs, rather than imposing them on others, says Banzhaf.
More importantly, increasing the cost of smoking – whether by raising tobacco taxes, or charging smokers higher premiums – has been proven to provide a very powerful and effective incentive helping them to quit, thereby reducing those totally unnecessary medical costs, he argues.
One simple way to do this is to allow employers and health insurance companies to charge smokers more for health insurance, based upon real actuarial data of the additional costs imposed.
Banzhaf notes that the only time this data was subjected to a full trial, with examination and cross examination under oath, was a case in which he participated. The court found that each smoking employee imposed a huge additional cost on his company – a cost usually passed on to and then shared by other workers – of over $12,000/yr in 2016 dollars.
In other words, if only 15% of a workforce smokes, this tiny minority imposes a totally unnecessary cost of $1,800 a year on each and every nonsmoking worker, Banzhaf calculates, with even more imposed by the less educated, who are more likely not to work or pay taxes.
Permitting companies to require smokers to bear their fair share of those costs would impose personal responsibility, and also slash smoking – thereby reducing this huge financial burden, says Banzhaf.
Letting individual businesses, as well as health insurance companies, decide for themselves what is fair and reasonable to charge for people who deliberately choose to damage their own health by smoking lets the free enterprise system, rather than bureaucrats, decide these important issues.
It’s also consistent with the underlying premise of insurance which is that those seeking insurance are required to share a risk, but only with those who take the same care as they do.
Thus, people who drive unsafely – as measured by accident claims, number of traffic violations, etc. – must pay more for the same coverage, since otherwise safe drivers would be forced to subsidize their unsafe practices. The same principle is usually applied to home insurance, where those who choose not to have smoke detectors, gas or CO2 detectors, burglar alarms, etc. are often charged far higher premiums.
The same should be true for those who choose to inflate their health care costs by smoking, and bureaucrats in Washington should not second guess private businesses and insurance companies, argues Banzhaf, as they now do under Obamacare, where the surcharge on smoking is limited to only 50%.
While some companies may believe that 50% adequately covers the excess costs smoking imposes, or for other reasons may choose to charge less than 50%, there are certainly many companies which would choose to charge a higher surcharge based upon actual actuarial data.
Any artificial cap imposed by the government is based upon politics and not medical science, and unnecessarily interferes with the more sophisticated decision making by the marketplace, says Banzhaf.
Even with the arbitrary 50% cap imposed by Obamacare, imposing a smoker surcharge by requiring smokers to pay more, as the Affordable Care Act [ACA] provides, can slash smoking rates among employees by 50% – as reported in the Wall Street Journal, the British Medical Journal, and elsewhere.
For those tens of millions who arguably would lose their coverage under Obamacare, and who therefore expect hard-working taxpayers to pay in whole – or even in significant part – for their health insurance, it is not unreasonable to expect them to exercise some small measure of personal responsibility for their own health care costs which they will be seeking to impose on others, says Banzhaf.
The single biggest step they can take to reduce their medical expenses – and the costs to taxpayers – would be to stop smoking. If they choose to continue smoking, perhaps taxpayers should not then buy insurance for them, or at very least ask them to pay something towards those huge added costs.
After all, anyone who can afford to pay almost $4,500/yr to satisfy a two-pack-a-day-habit, at an average per-pack price of $6.16/pack, can certainly afford to pay something towards health insurance.
Persons purchasing life insurance, health insurance, and sometimes even car and/or home insurance are generally honest in answering questions about their smoking, since they are concerned that they might find themselves left with no insurance coverage if they committed fraud to obtain it. To some extent, the same concerns might motivate the poor to comply with a smoking ban to obtain subsidies.
If not, there are other simple ways to help insure compliance, says Banzhaf.
For far too many years, while insurance companies charged smokers more for life insurance – and sometimes for car and/or home insurance – they hesitated to do so for health insurance.
This changed in 1984 when Prof. Banzhaf helped persuade the National Association of Insurance Commissioners to recommend that smokers pay more for health insurance coverage. Then, in 1987, HHS approved higher insurance rates for smokers; a decision reaffirmed in Banzhaf’s 2004 ruling.
If the Trump administration plans to rely upon free market competition to provide health insurance, it should let employers and health insurance companies make decisions about whether to charge more for people who willfully inflate their own risks and health costs, and not impose artificial caps.
Moreover, if people are to receive free or discounted coverage, they should be asked to at least take a small step towards personal responsibility for their own health by giving up cigarettes, he argues.
