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 tobacco 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.
However, 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 40 states and DC have expanded their coverage so far, extending Medicaid eligibility to adults with household income up to 138% of the poverty level (or higher, in the case of DC). In most states, there are no premium for Medicaid. Some states have expanded Medicaid with a waiver that allows for small premiums for some enrollees, but these premiums do not include tobacco surcharges.
Which states prohibit or limit tobacco surcharges?
For private individual/family 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 2024, eleven states and the District of Columbia had restricted or eliminated the tobacco surcharge.1 The most recent state to join that list is Virginia, albeit under legislation (SB1011 and HB1375) that only prohibits tobacco surcharges for 2024 and 2025. Virginia would have to enact additional legislation to extend this past the end of 2025.
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 Mexico (new as of 2023; only for the individual market, but not small group)
- New York
- Rhode Island
- Vermont
- Virginia (for 2024 and 2025 only, under the terms of SB1011 and HB1375)
Virginia lawmakers passed legislation in 2022 that would have banned tobacco surcharges as of 2023, but Gov. Youngkin vetoed the measures out of concerns that it would raise premiums for non-smokers and eliminate a potential incentive (the surcharge) that could encourage people to stop smoking. Youngkin had changed his perspective on the issue by 2023, however, and signed the new legislation into law.
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.”
How many Marketplace enrollees pay a tobacco surcharge?
As of the 2022 plan year, 416,870 HealthCare.gov enrollees were paying a tobacco surcharge, out of about 9.5 million enrollees.2 That does not include people in states that run their own Marketplaces. But all of the states that have banned tobacco surcharges are also states that run their own Marketplaces, so tobacco surcharges across the state-run Marketplaces are less common than they are in states that use HealthCare.gov.
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%. So depending on the state and the plan that a person chooses, they may not have to pay a tobacco surcharge even if they’re in a state that allows it.
Workers covered by employer-sponsored health insurance can generally 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.
Footnotes
- ”Market Rating Reforms, State Specific Rating Variations” Centers for Medicare & Medicaid Services. Accessed February 26, 2024. ⤶
- ”Issuer Level Enrollment Data; 2022” Centers for Medicare & Medicaid Services. Accessed February 26, 2024. ⤶
