A glitch in the computer system will initially offer relief to smokers for a year at least as the premiums are very high for those who used tobacco, according to Obama's health care law.
The administration has informed insurers that due to a computer system problem the penalties at present will be low for smokers - the issue would take a year to sort out.
It would depend on the insurer's response to this as younger smokers would end up paying higher premiums and the older ones would benefit. The preparations for the October 1st launch of new health insurance markets for individuals buying health insurance is the important criteria for the administration at the moment.
The White House also postponed for a year the rule where large employers had to offer coverage to employees or face fines, when they had more than 50 employees on their work force.
Health and Human Services spokeswoman Joanne Peters said that the smokers' issue was "a temporary circumstance that in no way impacts our ability to open the marketplaces on Oct. 1, because of a system limitation ... the system currently cannot process a premium for a 65-year-old smoker that is ... more than three times the premium of a 21-year-old smoker."
If an insurer tries to charge more, "the submission of the (insurer) will be rejected by the system," it added.
From the year 2014, according to the new Health Law - insurance companies could not refuse applicants with pre-existing illnesses, although smokers were to be charged 50% higher premiums.
The administration suggests that insurance companies should limit their penalties.
The HHS guidance document used the example of a 20 percent penalty for young and old alike.
For a smoker of the same age, the full 50 percent penalty would add more than $4,500 to the cost of the policy, bringing it to nearly $13,600. And new tax credits available to help pay premiums cannot be used to offset the penalty.
The administration suggested that insurers limit the penalties across all age groups. The HHS guidance document used the example of a 20 percent penalty for young and old alike.
Hannah Punitha (IRDA Licence Number: 2710062)
Ricardo Alonso-Zaldiver, July 2013