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  • BIOETHICS FORUM ESSAY

Charging Smokers Higher Health Insurance Rates: Is it Ethical?

Smoking-related illnesses cost the United States hundreds of billions of dollars a year in health care expenditures and lost productivity, and claim hundreds of thousands of lives.” Given the enormous medical and economic toll of smoking, it is not surprising that 58 percent of Americans favor charging smokers higher rates for health insurance to provide them with an incentive to stop smoking.

President Barack Obama’s signature piece of legislation, the Affordable Care Act (ACA), allows employers who provide health insurance and public and private health insurers to charge smokers up to 50 percent higher rates.  Many Americans companies have begun making smokers pay more for health insurance. Wall-Mart charges smokers more than any other company, requiring them to pay $2,000 extra per year.

Charging smokers higher health insurance rates is popular and legal, but is it ethical?  A close examination of the arguments for and against this policy reveals that it is not.

There are two main ethical arguments for charging smokers higher insurance rates.  According to the utilitarian argument, charging smokers more will encourage them to quit, which will improve public health and reduce society’s smoking-related costs.  Studies have shown that monetary incentives can significantly increase smoking cessation. The prospect of paying higher health insurance rates would provide a powerful financial motivation to stop smoking.

There are several objections to this argument.  Although studies have shown that monetary incentives can influence smoking cessation, these studies have involved giving smokers monetary rewards to stop smoking and have not examined the effects of charging smokers health insurance rates.  Clearly, more research is needed on the relationship between financial incentives and smoking cessation.

Second, even if charging smokers higher insurance rates encourages them to stop smoking, reducing smoking may not save society any money. Van Baal and colleagues compared the lifetime health care costs of three groups: smokers, obese individuals, and healthy individuals.  Until age 56, obese people had the highest health care expenditures, but in older age groups smokers had the highest costs. However, because smokers and obese people die younger than healthy individuals, healthy individuals had the highest lifetime health care expenditures.  The authors concluded that reducing smoking and obesity will not save society health care costs.

Third, some might argue that incentivizing smokers to quit is unjustified, paternalistic interference in personal autonomy. Smokers should be allowed to make lifestyle choices free from coercion from employers, insurers, or the government.  This objection is not very persuasive, however, because financial penalties do not significantly limit personal freedom.  Charging smokers higher health insurance premiums is no more objectionable than imposing taxes on tobacco products, alcohol, guns, or gasoline. Taxes do not prohibit people from engaging in behavior, but they can help to ensure that individuals bear the costs of their behavior.

The second ethical argument for charging smokers higher insurance rates is that it is actuarially fair because individual insurance rates should be based on expected payouts.  Insurance is collective protection against risk.  Charging individuals rates based on their risk helps to ensure that money paid out from the pool will not exceed money paid into the pool. Charging people rates based on their personal risks protects insurance companies against “moral hazard,” people taking risks without bearing the consequences.  By charging smokers higher health insurance rates, insurance companies can make people pay a price for the risks they take.

The main problem with the actuarial fairness argument is that different smokers may have different risks. A person who has been smoking two packs a day for 30 years has a significantly greater chance of developing lung cancer than someone who has been smoking only a few cigarettes a week for a few years. To be fair, policies adopted by employers or insurers would need to apply different rates to different smokers, depending on their individual risk. Moreover, if smokers are charged higher rates, then other higher-risk groups should also be charged higher rates, since it would be unfair to single out smokers. Thus, charging smokers higher rates would imply a commitment to higher rates for people who are obese, have high cholesterol, or engage in hazardous activities, such as motorcycle riding.  Genetic factors can also increase health risks, but genetic discrimination in employment and insurance is illegal in the U.S. and many countries.

The arguments against charging smokers higher insurance rates appeal to considerations of social justice and fairness.  This practice may lead many people to forego health insurance even though they may have to pay a fine under the ACA. Since smokers tend to have significantly lower incomes than non-smokers, they could be especially vulnerable to increased health insurance costs. If smokers opt out of health insurance this could have a detrimental impact on their access to health care and negatively impact their health and well-being.  Most insurance plans cover smoking-cessation programs.  It would be ironic–and tragic–if charging smokers higher health insurance rates prevented them from accessing services that could help them stop smoking.  To avoid this unfortunate outcome, rate increases should be kept low enough that they do not lead smokers to forego health insurance.  However, if rates are too low they may not provide a sufficient financial incentive to stop smoking.

While it is important to encourage people to stop smoking, charging smokers higher insurance rates may not be a fair or effective method of achieving this goal.  Employers and insurers should carefully consider the implications of such policies before they adopt them.  Policies that are adopted should be fair and not undermine smokers’ access to health care.  Policies should account for individual variations in health risk and may need to be revised if they produce have unintended negative consequences for smokers’ access to care and health.

David B. Resnik, JD, Ph.D, is a bioethicist at the National Institute for Environmental Health Sciences. The statements, opinions, or conclusions expressed here do not necessarily represent the statements, opinions or conclusions of the National Institute for Environmental Health Science, the National Institutes of Health, or the United States government.

Posted by Susan Gilbert at 09/19/2013 02:47:13 PM |

Published on: September 19, 2013
Published in: Health and Health Care, Health Care Reform & Policy, Medicine & Business

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