Health Insurance Premiums: Preventing Pre-Existing Not Paying For Them

Health Insurance Premiums: Preventing Pre-Existing Not Paying For Them
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Differential Health Insurance Premiums Attack The Problem Differently

WASHINGTON, D.C. (Dec. 17, 2018) – Now that a federal judge has ruled that all of the Affordable Care Act [ACA or Obamacare] is unconstitutional, many are worried that persons with pre-existing conditions will no longer be able to afford health insurance premiums, or that the insurance they may still be able to obtain will be too limited in coverage.

However, with regard to at least some of those pre-existing conditions, there is an alternative to preventing companies from having to absorb the huge expenses which a small minority impose upon the entire health care system, and which therefore result in higher health insurance premiums for the great majority of relatively healthy taxpayers, says public interest law professor John Banzhaf.

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It's obviously far better to prevent these costly conditions - such as cancers, heart attacks, strokes, etc. - from occurring in the first place than to force healthy people to bear those costs in the form of inflated health insurance premiums - especially with regard to the great majority of young people whose purchase of health insurance is deemed essential to prevent a system-wide collapse, argues Banzhaf.

A very different approach called "differential health insurance premiums" [DHIP] was pioneered by Banzhaf, who persuaded the National Association of Insurance Commissioners [NAIC] to adopt it, and to recommend the approach to insurance commissioners and health insurance companies in various states.

He also helped to persuade Congress to include it under Obamacare in the form of 50% surcharge on smokers.

Under this system, people who engage in activities such as smoking, which are highly likely to cause serious and expensive medical problems such as lung cancer, heart attacks, strokes, etc. are required to pay more for their health insurance than people who don't smoke.

The higher cost is not necessarily as a punishment or deterrent, but simply to cover the hugely inflated medical costs their dangerous actions generate, and which would otherwise, therefore, have to be paid for by the overwhelming majority of taxpayers who wisely choose not to smoke.

Smokers have long been charged more for their life insurance because of the deadly dangers their activity creates - with almost half of all smokers dying as a result of using tobacco.

In some cases, smokers have been charged a surcharge for health insurance premiums since the majority of home fire deaths are caused by smoking, and even for automobile insurance because smokers have a higher rate of accidents than nonsmoking drivers.

The costs of smoking are enormous, and DHIP can slash those costs for everyone because imposing an additional cost on tobacco use helps smokers do what most already wish to do: quit.

Under DHIP, the remaining costs are borne by those who cause them - smokers - and the great majority of taxpayers are not forced to pay for them through higher premiums.

According to the National Cancer Institute, lung cancer kills more Americans each year [154,050] than any other form of cancer - more than twice that of the next leading form of cancer - and the costs of treating this leading cancer are correspondingly huge.

Moreover, most lung cancers are caused by smoking, an activity only a tiny fraction of Americans (about 15% of adults) indulge in, yet the huge health care and other costs are shared by all Americans in the form of high taxes (to treat smoking-caused diseases under Medicare, Medicaid, and many other programs) as well as needlessly inflated health insurance premiums.

Indeed, the American Lung Association estimates that smoking costs the American economy over $300 billion a year (including over $115 billion in direct health care expenses alone).

Looking at it from another perspective, a judge in a case in which Banzhaf participated, after hearing all the evidence under oath and subject to cross examination, concluded that each smoking worker can cost his employer over $12,000 (in 2018 dollars) per year - thereby imposing a major financial burden on all of the other nonsmoking employees.

Recognizing this, and that many health insurance companies had already been charging smokers more for their health insurance - as they routinely do, for example, with life insurance - Banzhaf helped to amend the ACA to authorize companies to impose a 50% surcharge on smokers; an additional charge which would cover only a fraction of the additional costs their smoking adds to the insurer's financial burden.

So if the ACA is ended, this provision would also end, and the law regarding surcharges for smoking would revert to the law which existed prior to the passage of the ACA, says Banzhaf.

But, as a result of two different rulings which Prof. Banzhaf obtained in 1987, and then reaffirmed in 2004, insurance companies were authorized to charge smokers a surcharge on health insurance of any amount - or at least of any amount which could be justified by actuarial statistics.

Forcing smokers to pay more of their fair share of the huge costs their habit imposes on the nation's health care system is fairer than forcing the overwhelming majority of taxpayers who are not smokers to shoulder these costs.

It is also much fairer and more humane to require them to pay for the cancer and other diseases their smoking causes now, when they can still quit and thereby largely avoid the deadly disease and the entire surcharge, than denying them coverage after their deadly lung cancer [pre-existing condition] has been detected and it is too late.

This would impose, for the first time, widespread personal responsibility for individual health-related decisions, which is something both Republicans and Democrats insisted was necessary to slow ever escalating health-care costs, rather than the ACA approach which largely simply shifts these huge costs from one population group to others.

In other words, without DHIP, paying our every escalating health care costs in a zero-sum game under which the costs are largely shifted to nonsmokers. With DHIP, the number of smokers - and therefore the costs of what would otherwise become pre-existing conditions such as lung cancer, heart attacks, and strokes - are substantially reduced, and virtually everyone wins.

We do know from many studies that even small incremental increases in the cost of being a smoker - e.g., small hikes in the per-pack tax on cigarettes - clearly have a significant impact on helping the overwhelming majority of smokers who already want to quit to do so, notes Banzhaf.

Thus it is reasonable to believe that a multi-thousand-dollar surcharge on yearly health insurance premiums, even if broken up into monthly or bi-monthly payments, would have an even bigger impact - especially since smokers will see the figure all at once, rather than spread out over time as they do for a typical one-pack or two-pack a day smoker and a higher cigarette tax.

Indeed, the Wall Street Journal and the British Medical Journal have reported that imposing a smoker health insurance premiums surcharge can slash smoking rates among employees by 50%.

So, at least with regard to lung cancers, imposing surcharges on smokers before they contract lung cancer is far preferable and certainly fairer, than denying or limiting their coverage once the deadly disease [pre-existing condition] strikes. @profbanzhaf

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