Tobacco Surcharges, Health Insurance Coverage, and Smoking Cessation under the Affordable Care Act

To account for smokers’ excess health care costs and incentivize cessation, the Affordable Care Act (ACA) allows marketplace plans to impose a premium surcharge on tobacco users, while also requiring that plans cover tobacco cessation treatments. Because insurance tax credits are based on pre-surcharge premiums, this policy increases the cost of insurance enrollment substantially for many tobacco users. If smokers respond by choosing to remain uninsured, tobacco surcharges could have unintended effects on coverage and tobacco use. To consider this possibility, our study tests the relationship between surcharge levels and changes in both insurance coverage and smoking cessation as the marketplaces went into effect.

We collected data on marketplace premiums and surcharges by age and rating area for every state. The median surcharge in a rating area, defined as a percent increase over the unsubsidized premium, was used to define four surcharge levels: no surcharge, low (non-zero and <10%), medium (≥10% and <30%), and high (≥30%). Surcharge levels were then matched to 2011- 2014 Behavioral Risk Factor Surveillance System data on Medicaid-ineligible 25-64 year olds with incomes between 138 and 400% of the federal poverty level. In order to match respondents to correct premiums and surcharges, we omitted households with children, as a lack of data on family relationships prevented us from identifying family premiums.

Triple-difference analyses compare insurance coverage before and after marketplace implementation, for smokers versus non-smokers, at different median surcharge levels (N=206,952). These find that gains in health insurance coverage were attenuated among smokers facing medium (-4.3 percentage points; p<.10) and high surcharges (-11.6 percentage points; p<.05), relative to the no surcharge group. Age stratified specifications indicate that these results are particularly pronounced for younger respondents (i.e., under age 40), suggesting potentially costly implications for risk pooling.

Focusing on respondents who had smoked in the prior six months, cessation analyses use a difference-in-differences specification that compares pre- and post-implementation smoking cessation at different median surcharge levels (N=48,942). Here, the medium and high surcharge groups showed no increase in smoking cessation above the no surcharge effect, but smoking cessation declined in the low surcharge group (-5.6 percentage points; p<.05).

Overall, our results indicate that medium and high surcharges were associated with reduced insurance coverage and no concurrent increase in smoking cessation, while low surcharges appeared to reduce cessation. These findings suggest that the tobacco surcharges did not facilitate smoking cessation, and conflicted with a major goal of the ACA — increasing financial protection from high health care costs.