Smoking and health insurance

June 4th, 2013 at 12:00 pm by David Farrar

One of the reasons we have an excise tax on is because as taxpayers we have to fund the healthcare of those who smoke, and the rationale is they should pay for the costs of their choice – not us. And as it happens the level of excise tax is well above the level needed to cover the estimated costs associated with .

This got me wondering about how the costs are calculated in countries where people generally pay for their own healthcare, such as the US.

So my question is, does anyone know what the difference is in premiums in the US for health insurance for a smoker and non-smoker?

Also does anyone know what the difference is in NZ for life insurance premiums between a smoker and non-smoker of the same age?

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14 Responses to “Smoking and health insurance”

  1. Andrei (2,545 comments) says:

    There is a fallacy with comparing State funded health care with Health insurance here and that is with a health insurance company you pay premiums until you shuffle this mortal coil whereas with public health you only pay in while you are a tax payer thus all things being equal smokers who live, (is it six years less on average?) pay in less over a lifetime than non smokers who may remain healthy longer.

    On the other hand with state funded health care your major liability to the system most likely comes after you have ceased to contribute to it and the longer you live the greater that liability becomes.

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  2. Nigel Kearney (970 comments) says:

    If a 45 year old male smoker gets a term life insurance policy, they will pay just over double the amount a non smoker would pay. This is for yearly renewable so the premium will increase every year and the amount essentially reflects the likelihood of death within 12 months.

    Bear in mind that actuaries derive these values from statistics, not from proof of cause and effect. Smoking is associated with other risky behaviours the insurance company can’t easily find out about separately and the increased premium reflects that. If the person stops smoking those other risky behaviours will not necessarily stop.

    Also don’t forget the amount the taxpayer saves in superannuation payments to smokers. Bottom line is that the government has been whipping up anti-smoker sentiment for years to the point they can now use smokers as a revenue stream basically at will without many voters getting upset.

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  3. BlairM (2,317 comments) says:

    People don’t generally pay for the bulk of their health insurance in the United States. Their employer pays, and gets subsidies and tax breaks to do it. The idea that America has a “free market” in healthcare is a fiction. If New Zealand has “socialist” healthcare, then the US has “fascist” healthcare, where the government technically doesn’t own it, but controls every aspect to the point where it represents the worst of all possible worlds. I can tell you I’d much rather have the socialist healthcare than the fascist option. Much cheaper for everybody, and much more efficient.

    I don’t know what the rate is for smokers. I’ll have to look it up when I get to work tomorrow.

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  4. kowtow (8,167 comments) says:

    Tobacco has always been relatively heavily taxed going back to before this new fashion , anti smoking wowser bullshit.

    The reason ,in economics, it’s called inelasticity of demand.

    Got nothing to do with health.But it lets govt lie about “caring” and still raise shit loads of revenue.

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  5. Grendel (991 comments) says:

    ooh, ooh, this is one of my areas :)

    Across 6 of the major life companies, the average for a 30 year male old non smoker with 200K of life cover is $21.81 a month, for the same guy smoking its $34.79 a month.

    For the same guy, medical cover with a $300 excess, no specialists and tests, no gp or dental or optical its $48.48 a month as a non smoker and $56.65 as a smoker on average.

    it was not that long ago that some medical insurers did not have a smoking loading for the medical cover and as you can see the loading is not as high as the life cover one. the income cover and trauma cover loadings are at least the same as life and can be higher as they are riskier.

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  6. Tauhei Notts (1,678 comments) says:

    As a smoker I wanted to buy a $15,000 per annum ($1250 per month) annuity.
    As a smoker I knew I would get a discount.
    No fucking way.
    The price was the same whether you were a smoker or not.
    Either;
    (a) The actuaries are thieves.
    or
    (b) They know something the anti smoking zealots do not know.

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  7. Grendel (991 comments) says:

    Tauhei, if it was in the last 10 years the answer is more likely C and D.

    C. at the age most people buy an annuity (post 65), the odds of death are such that the difference between smoking and non smoking mortality rates are margin of error.

    D. so few people buy annuities in NZ that there is not enough scale to provide that sort of pricing discount.

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  8. peterwn (3,239 comments) says:

    In UK where annuities are much more common, one of the risk minimisation objectives of an insurance company was to ‘balance’ the life insurance ‘book’ and the annuities ‘book’. Hence if people started living longer than calculated, the annuities ‘book’ would take a hit, but that would be offset by the deferral of insurance payouts.

    There are two reasons why annuities are unpopllar in NZ. A simplistic tax system in the past discriminated against annuities as the total income was taxable, whereas the portion of income that was attributed to capital payment should have been tax free. The other issue is surviving partners and other rellies get all bitter and twisted when a person dies a year or two after buying an annuity – they think they should get a ‘refund’.

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  9. unitedtribes (30 comments) says:

    I dont think the tax on tobacco products is linked to healthcare officially at all. Are you sure?

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  10. mara (762 comments) says:

    Tax on cigs, is a “sin” tax, gleefully and cynically sicced on smokers. The liberals know that some kids are being starved because addicted family members spend more and more on cigs and have less and less to spend on food. I know nothing about health insurance, but I guarantee ya that the sin tax is hurting children.

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  11. Johnboy (15,903 comments) says:

    I’ve often wondered each time I drive down the road why we have such a vindictive pursuit of smokers while we encourage the import of heap of shit knackered Japper diesel 4WD’s and those horrid little trucks that all the little so called self employed ditch diggers drive spewing out more carcinogenic fumes than a Turkish whorehouse with a free hookah night.

    PC shit I guess! :)

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  12. slijmbal (1,231 comments) says:

    Having stopped looking at life insurance for smokers in the last 10 years for the Mrs as she’s a smoker I can state that the relative costs of even term insurance were practically double even in the early 90s.

    Mind you, as someone who was by BMI overweight but could run a 1/2 marathon in a decent time, exercised loads, had normal fat levels and perfect blood tests I was also punished in my premium because of my weight at that time. The insurance companies look for excuses to boost the premium.

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  13. PaulL (6,021 comments) says:

    Johnboy – if you sucked fumes directly from the exhaust of one of those trucks you’d be sort of doing the same thing as smoking. I don’t have problems with other people smoking, I’d rather they didn’t do it around me too much, and I’d definitely not do it myself.

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  14. OlderChas (24 comments) says:

    Which would kill you quicker? Sitting in a closed up car smoking cigarettes? Or sitting in a closed up car with a hose off the exhaust pipe in the window?

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