By Stephanie Armour
WASHINGTON--Federal regulators are weighing whether health
insurers who participate in Affordable Care Act exchanges can levy
a tobacco surcharge on e-cigarette users, the latest point of
debate over the products' health risks.
The 2010 health law allows insurers in individual and small
group markets to charge tobacco users as much as 50% more in
premiums. But it doesn't specify whether that includes users of
electronic cigarettes, battery-powered devices that turn nicotine
liquid into vapor.
Centers for Medicare and Medicaid Services is still evaluating
how issuers may treat individuals who use e-cigarettes under the
tobacco rating rules, said Aaron Albright, a spokesman for the
agency, which hasn't disclosed a timetable for the review. The
review comes after the Food and Drug Administration in April
proposed the first federal regulations on e-cigarettes.
Employers including Wal-Mart Stores Inc. and United Parcel
Service Inc. already charge employees who use e-cigarettes more
because of concerns the products pose a health risk. But critics of
the practice say such fees discourage traditional smokers from
switching to a potentially safer alternative.
"It's a very sticky situation," said Ray Story, chief executive
officer and founder of the Tobacco Vapor Electronic Cigarette
Association. "What we're trying to provide is a product that's less
harmful. You can't paint it with the same brush as conventional
cigarettes."
Almost 90% of 151 life insurance underwriters said they consider
e-cigarette users a smoker and about 40% said their company has an
underwriting policy with respect to their use, according to a May
survey by Munich American Reassurance Co., which provides life and
health insurance to U.S. insurance companies. Of the 62
underwriters who indicated their insurance company has an
underwriting policy on e-cigarettes, more than 80% classify them as
a tobacco product.
"We don't know what the health effects of e-cigarettes are, but
we do know nicotine has potential negative effects," said Mark
Skillan, a medical director at Munich American Reassurance.
Researchers in Greece found signs of airway constriction and
inflammation after short-term use of the products, and other
studies have also indicated there may be risks.
The insurance debate has led to an unlikely agreement between
the tobacco industry and health advocacy groups, both of which are
opposed to an e-cigarette surcharge. Such charges runs counter to
the intent of the federal health law, which was designed to reduce
barriers to health care, said Dick Woodruff, vice president of
federal affairs at the American Cancer Society Cancer Action
Network.
David Howard, a spokesman for R.J. Reynolds Vapor Co., an
operating company of Reynolds American Inc., said: "We don't
believe policies should be implemented that might deter current
smokers from considering switching to smoke-free alternative
products like e-cigarettes." (Reynolds plans to roll out is Vuse
e-cigarette this year, and also is said to be in merger talks with
Lorillard Inc., maker of the popular Blu e-cigarette.)
The nascent U.S. e-cigarette market has ballooned to $2.5
billion in annual sales from almost nothing eight years ago,
according to a Wells Fargo estimate. More conservative estimates
say e-cigarette sales could top $2 billion in 2014, up from about
$1.5 billion last year, when sales roughly doubled. An estimated 3
million people in the U.S. are "vapers," that is, people who use
e-cigarettes of various types.
Wellpoint Inc.'s affiliated health plans' applications include a
tobacco-use question for individual and small group policies to
help determine rates; the insurer currently doesn't collect
information on e-cigarettes. Another insurer, Highmark Inc., says
that, for their commercial business and ACA products, it considers
smoking to be the use of cigarettes, cigars and chewing tobacco,
and it doesn't include e-cigarettes at this time.
Cigna Corp. says that, because the federal law didn't include
e-cigarettes in the definition of tobacco use, the insurer isn't
considering them tobacco use for the purposes of its individual and
family health plans, whether on or off the ACA exchanges.
Insurers in the exchange may levy a surcharge if enrollees used
tobacco four or more times per week within the past six months. The
surcharge on traditional tobacco users may top more than $1,000 a
year and can't be applied to tax credits in the law that offset the
cost of insurance for lower earners.
At Popie's Vapor Lounge, in a strip mall in Marlton, N.J., owner
Robert Eichenberger, says he is helping people quit traditional
tobacco. "A sin tax like they're cigarettes is ridiculous," he
said.
Edward Chatlos recently gave up his pack-a-day smoking habit and
took up electronic cigarettes. While he doesn't have insurance, he
doesn't think he should pay higher premiums for using e-cigarettes
if he opts to sign up next year for coverage through his state-run
health insurance exchange. "It's not the same," said the
62-year-old Mr. Chatlos, of Decatur, Ga.
Write to Stephanie Armour at stephanie.armour@wsj.com
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