Monday, March 10, 2014

Smoke 'em if you got 'em

The ObamaTax has evicerated the concept of underwriting, at least so far as medical insurance is concerned. About the only thing for which carriers can levy a surcharge is tobacco use. In fact, the law allows them to charge up to 50% for tobacco users.

Two questions spring immediately to mind: first, what's the definition of "tobacco use" and second, what if you lie about misrepresent your tobacco use when applying for coverage?

The first seems simple enough. According to HHS (as included on ACA plan applications):

"Tobacco Smoker definition – the legal use (other than religious or ceremonial) of any tobacco product on average four or more times per week within no longer than the last six months."

So let's dig a little deeper: what, exactly, constitutes a "tobacco product?" Well, a Marlboro or a Cohiba would suffice, as would a nice briar or meerschaum, or even a "pinch of chaw."

But what about e-cigarettes (e-cigs)?

About a year ago, we looked at how life insurance companies were underwriting e-cig users ("vaping"). Turns out, some of the same issues will now confront those looking to buy a new ObamaPlan. That's because, as noted above, tobacco use can result in a substantial premium hike. But is "vaping" truly "smoking" (in that context)? To determine that, we really have to discover the source of the nicotine:

"Nicotine is a[n] ... alkaloid ... found in the nightshade family of plants ... The main source of nicotine is the tobacco plant."

Although it can also be found in much lower quantities in, for example, eggplants and tomatoes, e-cig "juice" gets its jolt via extraction of nicotine from tobacco leaves. So it seems pretty obvious that, insofar as the ObamaTax is concerned, vaping is tobacco use.

Which brings us to our next little conundrum: what happens if one simply answers "no," even if one does, in fact, partake of that Marlboro, Cohiba, briar or e-cig? What's the worst that could happen?

Turns out, not much:

There are really only two possible outcomes should one be caught lying about one's tobacco use: rescission or reimbursement. Rescission is when a carrier cancels your policy as if it was never actually in-force. That particular option is much less applicable under the ObamaTax. In fact, I tried very hard to find a definitive answer as to what it would take for a carrier to legitimately rescind a policy; turns out, it's very difficult to pin that down.

But thanks to FoIB and fellow insurance blogger Louise Norris, we learn that:

"If an enrollee is found to have reported false or incorrect information about their tobacco use, the issuer may retroactively apply the appropriate tobacco use rating factor to the enrollee's premium as if the correct information had been accurately reported from the beginning of the plan year. However, an issuer must not rescind the coverage on this basis. "

And, what, pray tell, happens if (when) said miscreant ignores the collection plate? Nothing, apparently, since they can't rescind the policy. Can they refuse to pay claims until premiums are caught up? Maybe, maybe not.

I'm just not seeing a downside to lying about this.


[Hat Tip to FoIB Brian D!]
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