Obamacare: Glitch in System Could Favor Smokers

Yet, another delay in the healthcare overhaul due to a glitch in the system last week involving the healthcare law. This means smokers may get at least some relief next year from tobacco use penalties. A fix will take at least a year.

Due to the system limitation, the system cannot currently process premiums for a 65-year-old smoker that is only three times the premium of a 21-year-old smoker. If an insurer tries to charge more, the system will reject it. These penalties could make the premiums unaffordable for older smokers.

The underlying reason for the glitch is a provision in the law that says insurers cannot charge older smokers more than three times they charge a younger smoker. Before the glitch, insurers may have only charged a low penalty for younger smokers to entice them to sign up. In turn, charging older smokers a higher penalty to offset the amount.

The administration is suggesting that insurers limit the penalties across all age groups. Now the insurers are faced with a dilemma of charging everyone in the pool of policy holders the same rate, all smokers or all non-smokers. The HHS guidance document used the example of a 20 percent penalty for young and old alike.

In that case, the premium for a 64-year-old smoker would be about $10,900, a significant cut from $13,600 if insurers charged the full penalty.

Younger smokers and older smokers can still be charged different penalties, but if the total premiums and penalties is more than three times greater for older smokers, the system will kick it out.

Some see a patter of last-minute delays and changes with the law. The week prior the Obama Administration delayed the Employer Mandate. Some question the integrity of the law as we move forward to full implementation come 2014.

The administration scrambles to prepare for the October 1st launch of the new health markets. As things begin to unfold, time races against them. The big question is will everything align correctly as the open enrollment starts for 2013.

Workers who receive their health insurance benefits through their employer could avoid tobacco penalties by joining smoking cessation programs because employer plans operate under different guidelines.

Starting in 2014, the law requires insurance companies to accept all applicants regardless of pre-existing medical problems. However, it also allows them to charge smokers up to 50 percent higher premiums. This is a way for insurers to ward off bad risks.

Butch Zemar