CMS Issued an FAQ on September 13, 2013 explaining how an individual’s premiums will be affected if the individual uses tobacco but agrees to participate in a tobacco cessation program. This guidance applies only to coverage purchased in a Qualified Health Plan (QHP) through a Federally-Facilitated Marketplace for the Small Business Health Options Program (FF-SHOP), and does not require the same treatment under coverage purchased in a state-run marketplace or in an employer group health plan outside the Marketplace. In fact, the final Wellness Rules require different procedures in employer group health plans outside the FF-SHOP.
Background
The ACA allows carriers in the small group market to charge tobacco users premiums that are 1.5 times higher than premiums for non-tobacco users (e.g., $450 monthly premium versus $300 monthly premium). Additionally, the ACA allows employers to implement tobacco cessation wellness programs that impose on tobacco users a financial penalty of up to 50% of the total applicable premium for tobacco users. (Note that California AB 1083 does not allow carriers in the California small group market to rate based on tobacco use, but only on age, geographic area, and family tier.)
Details of the CMS FAQ
Generally, the FF-SHOPS will impose the tobacco premium rating surcharge at the time of initial enrollment (or re-enrollment) if an employee or dependent is a tobacco user. However, the FAQ provides that the FF-SHOPS will not impose the surcharge if an individual uses tobacco but agrees at the time of initial enrollment (or re-enrollment) to participate in a tobacco cessation wellness program that meets the standards under PHSA 2705.
The FAQ also provides that if an employee or dependent initially declines to participate in a tobacco cessation program, but in the middle of the year decides to participate, the individual’s premiums will not be reduced until the next renewal or enrollment date. This is because an individual’s premium will be established for a one-year period in the FF-SHOPS, and will not be reduced (immediately or retroactively) even if the individual agrees mid-year to participate in a mid-year tobacco cessation program.
The FAQ does not specifically address this, but it appears that a logical corollary is that if an individual does agree at the time of initial enrollment (or re-enrollment) to participate in a tobacco cessation program, but subsequently quits the program (or never even starts it), such individual would have the lower premium (without the tobacco use surcharge) for the entire year. Perhaps the potential penalty for lying and getting caught would be that the FF-SHOP could terminate the individual’s coverage?
The following matrix summarizes the above:
| Tobacco Use or Not? or Participate in Tobacco Cessation Program? | Does the Tobacco Surcharge Apply? |
|---|---|
| At the time of initial enrollment(or re-enrollment), individual uses tobacco and does not agree to participate in a tobacco cessation wellness program | FF-SHOPS will impose the surcharge for the year |
| At the time of initial enrollment(or re-enrollment), individual uses tobacco but agrees to participate in a tobacco cessation wellness program | FF-SHOPS will not impose the surcharge for the year |
| At the time of initial enrollment(or re-enrollment), individual uses tobacco and does not agree to participate in a tobacco cessation wellness program, but decides mid-year to participate | FF-SHOPs will not reduce the surcharge until the next renewal or enrollment date |
| At the time of initial enrollment(or re-enrollment), individual uses tobacco but agrees to participate in a tobacco cessation wellness program, but subsequently quits or never even starts it | Appears that FF-SHOPs will not impose the surcharge for the entire year |