Youngkin to sign bill ending tobacco user insurance surcharges

Published 5:52 pm Tuesday, March 14, 2023

By Leah Small

Virginia Mercury

In an about-face, Gov. Glenn Youngkin’s administration said he supports legislation that would eliminate higher premiums on health insurance for tobacco users in Virginia. Youngkin vetoed similar bipartisan legislation last year on the grounds that it would increase health care costs for Virginians who don’t use tobacco and get rid of a tool meant to incentivize users to kick smoking. 


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But supporters of two identical bills from the House and Senate that would eliminate the surcharge, a change recommended by Virginia’s Joint Commission on Health Care, say the move would save money for all Virginians with insurance, regardless of whether they use tobacco, and improve access to therapeutic support to quit the habit.

The Affordable Care Act allows insurance companies to charge tobacco users up to 1.5 times more than non-users due to associated health risks, with the intention of pushing consumers into tobacco cessation programs. But analysts say the strategy has backfired, because the surcharge discourages many tobacco users, especially those who are low-income, from buying health insurance at all.

“While tobacco use of any kind among the adult population is less than 20 percent, it may be as high as 40 percent for low-income adults,” a 2021 Joint Commission on Health Care report found. 

For low-income consumers insured through the individual marketplace, “the surcharge is calculated after federal subsidies, so even low-income individuals pay the surcharge, which can make insurance unaffordable,” said Del. Karen Greenhalgh, R-Virginia Beach, who introduced the House bill. 

Research also shows the tobacco surcharge increases premiums for all consumers because it keeps younger, healthier smokers who are not yet impacted by decades of tobacco use out of the insurance pool, said Patrick Giallorenzo, chief of staff for Sen. John Edwards, D-Roanoke, who introduced the Senate bill. These younger, uninsured smokers also can’t take advantage of coverage for tobacco cessation programs.

“[Younger] smokers eventually get insurance as they get older, so the surcharge makes the cost-shift to non-smokers worse, not better,” Giallorenzo said. 

Youngkin supports the initiative this session because of amendments that call for an annual report on the reduction of premiums due to ending the tobacco surcharge and the percentage of new insurance enrollees in localities with high rates of tobacco use, according to an email from Macaulay Porter, Youngkin’s press secretary. She also said an amendment that calls for a 2026 sunset of the act, requiring the General Assembly to take the bill up again next year, factored into Youngkin’s decision.

“The support stems from the policy guardrails put in place by the reporting requirement and the sunset,” Porter wrote.

The legislation is still awaiting the governor’s signature.


Other states’ surcharges

Federal law allows states to decrease or eliminate the surcharge, and six, plus Washington D.C., have decided to end it. In a national study on the impact of the tobacco surcharge on insurance enrollment published in 2020, the premium increase was found to reduce insurance enrollment among smokers by 4 percentage points. Smokers without insurance through an employer or public program such as Medicaid were 9 percentage points less likely to seek insurance through the individual marketplace if they had to pay the tobacco surcharge.

In states with the highest surcharges, smokers were more likely to be uninsured, the researchers found. For every 10 percentage point increase in the tobacco surcharge, enrollment among smokers was 3.4 percentage points lower.

Models from the 2021 JCHC report estimate that ending the tobacco surcharge would reduce the number of uninsured Virginians by anywhere from 3,000 to 14,000 and lower premiums between 3% and 4.5%. Analysts projected these ranges based on the then-possible extension of American Rescue Plan Act increases in financial aid for consumers already receiving subsidies on the individual marketplace and expansion of subsidies to include middle-income people previously priced out of coverage. Originally scheduled to end in 2022, the enhanced subsidies were extended until 2025 under the Inflation Reduction Act, saving many insured people thousands annually.

Analysts projected that both ending the tobacco surcharge and continuing the federal subsidies would have the greatest impact on premium reductions. If the subsidies had ceased, then ending the tobacco surcharge would have had a greater impact on decreasing the number of uninsured Virginians, said Jeff Lunardi, executive director of the Virginia Joint Commission on Health Care. With the subsidy cliff averted, the “impact of the tobacco surcharge being eliminated is smaller because many are staying in the market due to enhanced [subsidies],” Lunardi said. 

“Essentially, the [subsidies] have an outsized impact on people’s decision to purchase marketplace coverage, but even with the enhanced subsidies, the tobacco surcharge is still a net positive,” Lunardi added.


Uninsured numbers in flux

There are even bigger factors determining the number of uninsured people in Virginia. 

Because the JCHC report is based on data from 2021, the analysis does not account for record enrollment in the Affordable Care Act marketplace in 2022. Starting in late March,  the resumption of state reviews of Medicaid eligibility, triggered by the end of the COVID-19 public health emergency in May, may be the “biggest driver of any change in uninsured status in 2024” in Virginia, Lunardi said. States have been prohibited from disenrolling individuals from Medicaid since the beginning of the pandemic to provide protection against economic hardship. As of late last year, roughly 16% of Virginia’s population was covered by Medicaid.

Tobacco users who suddenly find they are just over the financial cutoff to qualify for Medicaid may find themselves turning to the individual market for coverage, where the tobacco surcharge would be a financial hurdle, said Ben Barber, president-elect of the Virginia Public Health Association. And because the state will be reevaluating Medicaid eligibility, individuals may experience interruptions in needed health care, Barber adds.

“There are certainly going to be people who will be determined ineligible and will need to find affordable coverage elsewhere, and for many of these people it’ll be the marketplace, so I think that’s the bigger picture,” Barber said. “But then there’s this sub-story, which is the tobacco surcharge, and the extent to which people who lose their coverage through the redetermination process are tobacco users.”

Essentially, the tobacco surcharge is one of many hurdles to equitable health care coverage, Barber and other public health advocates said.

“Tobacco users tend to have lower incomes, which is often a barrier to coverage,” Barber said. “Charging them more to access the care they need … is harmful and inequitable. The VPHA is cautiously optimistic that this barrier will go away, and people will be able to afford quality coverage and get the care they need for their tobacco use and beyond.”


Reprinted courtesy of Virginia Mercury,