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D.C. exchange bars tobacco surcharge

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Advocates for consumers who smoke have won a health insurance pricing victory in the District of Columbia.

The D.C. Health Benefit Exchange Authority board has decided to require the insurers that sell coverage through the exchange to charge tobacco users the same rates that they charge consumers who do not use tobacco.

About 20 percent of all D.C. residents and 31 percent of African-American residents smoke, authority officials said in an announcement of the decision.

Dr. Mohammad Akhter, the chair of the board, said in a statement that the authority board wants to help open the health insurance market to people who have been shut out of the market due to health problems.

“Charging significantly more for health insurance is in direct conflict with our efforts to help people quit smoking,” Akhter said.

The Patient Protection and Affordable Care of 2010 (PPACA) calls for the U.S. Department of Health and Human Services (HHS) to work with regulators in all 50 states and the District of Columbia to make exchanges, or Web-based health insurance supermarkets, available by Oct. 1.

The District of Columbia has decided to set up its own exchange rather than have HHS provide exchange services for its residents. D.C. regulators hope to require insurers to offer all new individual and small-group health coverage sold in the district through the D.C. exchange.

Officials have argued that, because the D.C. market is a small market, the only way to make the exchange successful is to have it handle all new individual and small-group sales.

Brokers could still earn commissions from carriers by serving individual and small-group customers, but, if the policies proposed by the authority board take effect, they will have to sell those customers the same “qualified health plans” (QHPs) offered on the exchange.

PPACA also will prohibit carriers from using personal health information when deciding whether to issue coverage that is set to take effect on or after Jan. 1, 2014, and it will sharply limit carriers from using personal health information other than age when the carriers are pricing coverage.

PPACA will let carriers charge tobacco users rates that are up to 50 percent higher than the rates other users pay.

Many patient advocacy groups have been asking state and federal exchange builders to ban or minimize use of tobacco use penalties.

In the District of Columbia, the American Cancer Society and the American Lung Association were two of the groups that lobbied against the idea of D.C. exchange QHPs imposing tobacco use surcharges, D.C. exchange authority officials said.

The groups that low-income people are more likely to use tobacco than high-income people, and that a tobacco surcharge could hurt the low-income D.C. residents who need coverage most, officials said.

In a background brief prepared by the D.C. exchange authority board staff, analysts cited an earlier report that David Dillon, an Arkansas official, prepared for the team designing the “partnership exchange” that Arkansas is building with HHS.

In addition to listing concerns about the possible effects of a tobacco surcharge on low-income consumers and African-American consumers, Dillon said some have speculated that “insurers could use a high tobacco-rating factor as an indirect underwriting factor for other conditions.”

The D.C. exchange board staff said advocates of a tobacco use surcharge believe that a surcharge could encourage some users to quit and could reduce the likelihood that non-users will subsidize the health care costs of tobacco users.

The District of Columbia now lets health carriers use tobacco use as a factor in medical underwriting, the exchange board staff said.

Massachusetts does let carriers use tobacco as a rating factor, but none in the individual or small-group markets do, the staff said.

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