Burning Insurance Question: Are 'Vapers' Smokers?

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.

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