How Obamacare burns smokers, the Economist’s anonymous staff, and New York City’s bike-sharing program
Amid all the publicity around the glitch-filled launch of the Obamacare health insurance exchanges and the accompanying debate over whether the premiums being offered will be low enough to attract enough buyers, one aspect of the story hasn’t gotten nearly the attention it deserves.
Almost anyone who has followed the story knows that Obamacare doesn’t allow people with pre-existing conditions to be denied coverage or to be charged extra; that it limits the price differentials that can be charged to older people versus younger customers; and that it provides government subsidies to those living below 400 percent of the poverty level to help them pay their premiums. But what’s not well-known is how Obamacare lowers the boom on the 19 percent of American adults who smoke, substantially negating all three of those consumer-friendly features.
Being a smoker is the one pre-existing condition that insurance companies can discriminate against under the Affordable Care Act. In fact, insurers participating in the exchanges can charge a premium of up to 50 percent for smokers.
But the penalty doesn’t stop there: The premium subsidies that Obamacare makes available for the poor and lower-middle class are based on a formula that subsidizes an individual or family so that they do not have to pay more than a certain percentage of their income — out of their pockets– for their insurance. However, under the law, those subsidies cannot be applied at all to pay the 50 percent smokers’ premium. The loss of that subsidy can be a big deal.
Suppose, for example, someone earning $20,000 a year would qualify for a $3,000 subsidy on an insurance plan costing $4,000 a year. This would make his annual cost $1,000. But if he’s a smoker, the same plan might cost $6,000 a year (factoring in the 50 percent surcharge on the $4,000 sticker price). He would still only get a $3,000 subsidy, because the subsidy can’t be applied to the smokers’ penalty. That means he would pay $3,000 out of pocket instead of $1,000.
As this article in USA Today pointed out, smokers tend to be overrepresented in the lower income demographic groups and also among the currently uninsured. Both groups are the people most likely to want to buy insurance on the exchanges. So the penalty is likely to affect a significantly higher percentage of exchange customers than the overall 19 percent of American adults who smoke.
In one regard, the policy makes sense. Why shouldn’t those who choose to smoke — and, therefore, are far more likely to need the healthcare the insurers are promising to provide — pay more? If not, the rest of us would be subsidizing them.
On the other hand, if one views smoking as an addiction, not a choice, then isn’t it just another pre-existing condition?
On the third hand, if the goal of the Affordable Care Act is to protect the most vulnerable by offering them affordable protection, why would we want to discourage smokers — a fifth or more of the population and a group who are exceptionally vulnerable to health issues — from signing up?
Now that the exchanges are open for business it’s time for a full exploration not only of those policy issues, but also reporting from the field on how the penalty is affecting smoker sign-ups. We should also want to know how the penalty is affecting overall premiums and how much of a dent it puts in the Obama administration’s boasts, the week before the exchanges opened, that average premiums are significantly lower than had been predicted. (The administration’s press release and accompanying white paper about all that didn’t include the smokers’ penalties in touting the various state-by-state average premiums.)
Finally, how is the smoking surcharge enforced? What if I’ve polluted my lungs and bloodstream with Marlboros for 30 years but quit smoking the day before I sign up for a plan? Am I a non-smoker? What if I say I quit but didn’t? Or what if I go back to the habit a month after signing up?
2. Understanding anonymity at the Economist:
I used to think that people subscribed to the Economist so that they could have it on their coffee tables to impress friends. My assumption was that because I didn’t read my copies too avidly, they never really read them either.
But several months ago, I was on an airport runway and had to turn off my electronics, leaving me with only the magazine to read. As the takeoff got delayed I found myself diving into article after article, and I was stunned by how intelligent and original the Economist is on subjects I’ve already read about (e-cigarettes or Germany’s election, in the last issue) or subjects I didn’t think I cared about (“Water and Agriculture in Kansas”).
With my new loyalty to the Economist in mind, here’s what interests me most about the publication that I would like to see a story about: the Economist has no bylines. In fact, there’s not even a masthead to tell me who the editor or editors are who deserve the credit for all this smart stuff. (Such anonymity was more common when the Economist was founded in 1843.)
A Google search will quickly tell you that the editor is John Micklethwait, and the Economist’s website does list its editorial staff, with mini-bios. But for most journalists, let alone journalists who produce such world-class stuff, that usually isn’t enough. They — well, we — like our bylines. We don’t like to labor anonymously. Some even enjoy going on television to talk about what they’ve written.
So how does the Economist attract such extraordinary but apparently ego-less talent? What does that talent say about the sacrifices, or rewards, of hitting home runs every week with no one in the ballpark cheering them on? And has the Economist done any research on what readers think of reading stories with no names attached?
3. Behind the big-city bike-sharing business:
New York City’s bike-sharing program, Citi Bike, which was launched last spring, seems like it’s already a big success. It also seems to be a logistical tour de force, enabled by amazing software that predicts and tracks usage in order to get the thousands of bikes positioned at the right docking stations around town so that they can be shared efficiently and conveniently.
NetJets, the fractional private aircraft ownership company, was considered a logistics and software marvel soon after it began operations about 27 years ago. But it has 650 jets, while Citi Bike already has 6,000 bicycles in its fleet, with more on the way.
Similar systems are operating in cities around the world, from Paris, to London, to Denver to Washington, D.C., to Minneapolis.
So how does it all work? What’s the financial model in New York and elsewhere? Is this a for- profit service? If so, who are the investors that stand to win or lose? Is Citibank just paying to have its name emblazoned on the fleet, or is it a financial participant?
I’ve seen trucks in New York hauling bikes from overstocked docking areas on city streets to those that need bikes (presumably the equivalent of a NetJet flying to an airport without passengers). How is all of that monitored and minimized? How is the program adjusted based on tracking data related to where and when the bikes are being used?
What have been the biggest surprises and challenges so far in New York? Have taxi or subway revenues been affected?
And what are the differences between New York’s program and some of the others?
All grist for a bunch of good stories.
PHOTO: People smoke during a break outside an office building in midtown New York September 3, 2013. REUTERS/Carlo Allegri