California State University Researcher Yields New Study Findings on Financial Markets (Rate-Making, Smoker Surcharge, and Insurer Risk Management Under the U.S. Affordable Care Act): Finance – Financial Markets

Health Policy and Law Daily

2025 OCT 27 (NewsRx) -- By a News Reporter-Staff News Editor at Health Policy and Law Daily -- Investigators publish new report on financial markets. According to news reporting from California State University by NewsRx journalists, research stated, “Rate-making - a vital component of insurance and risk management - can be creative and at times contentious because pricing is its central goal. In the United States, the Affordable Care Act (ACA) permits insurers in the non-group and small group markets to vary health insurance premiums only on the basis of age, geographic location, family coverage, and tobacco use.”

The news correspondents obtained a quote from the research from California State University: “Tobacco use as a rating factor in setting insurance premiums cannot exceed 50 percent of the non-smoker rate. Academic literature is limited and focuses on questions of insurance accessibility and equity, and smoking cessation impact. There is yet no study or evidence available on the price or financial burden that may be imposed by rate-making on (different variants of) the smoker or tobacco surcharge. In approaching the surcharge from a payer - rather than enrollee - standpoint, this study conceptually investigates how insurers might devise tobacco surcharges to manage objective risk and their premium price implications while meeting both regulatory and business imperatives. The federal standard age curve of the CMS (Centers for Medicare & Medicaid Services) and sampled insurer rating schedules were used in this study to develop illustrations of multiplicative and additive rate structures of the tobacco surcharge. Findings suggest that insurers have latitude to apply tobacco surcharges within and perhaps beyond the substantive intent of healthcare reform, provided the state where they operate does not prohibit it or only reduces the federal cap.”

According to the news reporters, the research concluded: “ACA implementing and state regulations do not appear to restrict or diminish such flexibility. The risk-related and public policy consequences of modified community rating for smokers are addressed by way of conclusion.”

For more information on this research see: Rate-Making, Smoker Surcharge, and Insurer Risk Management Under the U.S. Affordable Care Act. Financial Markets, Institutions and Risks, 2025,9(3):17-33. The publisher for Financial Markets, Institutions and Risks is Academic Research and Publishing UG.

A free version of this journal article is available at https://doi.org/10.61093/fmir.9(3).17-33.2025.

Our news editors report that more information may be obtained by contacting Roger Lee Mendoza, Ph.D., College of Business and Economics, California State University, United States.