2013-08-23 21:25:05 - WASHINGTON, D.C. (August 23, 2013): Delta Airlines has reported that Obamacare will cost it an additional $100 million a year – a huge amount especially considering that, as a self insurer, it avoids many of the negative impacts of the new law – but it is apparently ignoring another provision which, if utilized, could probably not only avoid the loss, but actually increase its net profit, says public interest law professor John Banzhaf.
Although most observers have predicted that Obamacare is likely to significantly increase the cost of individually-purchased health insurance, it has generally been assumed that the impact on large employer-sponsored health insurance plans such as Delta's would be much less, because such plans are exempted from many of the statute's most onerous provisions.
So, for many, it may be a matter of serious concern that Delta is reporting that Obamacare will increase its health care expenses by about $100 million a year – eating up about 10% of its annual profits – especially in an industry which has historically been chronically unprofitable.
But if about 20% of the 160,000 participants in Delta's health insurance plan are smokers [about the national average], the company
could take advantage of the provision of the Affordable Care Act which permits charging smokers 50% more than nonsmokers for health insurance – an amount which could exceed $5,000 for older workers [according to the AP] – to avoid virtually all of the loss, and perhaps save even more each year, says Banzhaf, who first developed the concept of charging smokers more for health insurance, obtained federal rulings permitting it, and fought to have it included under Obamacare.
In the only court case where evidence was presented under oath and subject to cross examination, a judge ruled that a single smoker cost his employer more than $12,000 annually, says Banzhaf, who participated in the legal proceeding which upheld the right of employers to refuse to hire smokers.
At those rates, the estimated 32,000 Delta smoking participants could be costing the company over $350 million a year, more than three times the company’s reported loss due to Obamacare.
But, even if Delta charged smokers on the average only some $2,000 more each year for health insurance – less than one-fifth of what their smoking may well be costing the company, and indirectly being passed along to the majority of workers who are nonsmokers – the increased premiums would cover about two-thirds of the $100 million the company is complaining about.
Moreover, as both the Wall Street Journal and the British Medical Journal have just noted, “many employers [are] reporting that [the Obamacare smoker surcharge] has halved smoking rates in the workplace.” If it did the same for Delta, and the saving was only $10,000/yr for each participant, the saving to Delta would far exceed the $100 million more Obamacare is likely to cost it.
JOHN F. BANZHAF III, B.S.E.E., J.D., Sc.D.
Professor of Public Interest Law
George Washington University Law School,
FAMRI Dr. William Cahan Distinguished Professor,
Fellow, World Technology Network,
Founder, Action on Smoking and Health (ASH)
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