RD2 - Report on the Elimination of the Tobacco Surcharge on Health Insurance Affordability and Purchase – January 1, 2024

Executive Summary:

Legislation (House Bill 1375 and Senate Bill 1011) passed during the 2023 Virginia General Assembly Session eliminated the ability of health insurance carriers to include a surcharge(*1) for tobacco use effective January 1, 2024. Additionally, these bills directed the State Corporation Commission (Commission) to submit an annual report summarizing the reductions in premiums related to the elimination of the tobacco surcharge and the percentage of new enrollees in higher-than-average tobacco-use locales, with provisions set to expire on January 1, 2026.

In 2023, eight of fifteen health carriers applied tobacco surcharges, ranging from 5% to 20%, in the individual health insurance market. None applied the tobacco surcharge in the small group health market.

Depending on member age, the elimination of the tobacco surcharge for the 2024 Plan Year reduced the per member per month rate between $25 and $123 for Virginia tobacco users. For the 2024 Plan Year, overall premium rates increased $3.80 (less than 1%) per member per month to account for the elimination of the tobacco surcharge.

To prepare for future reporting, the Bureau identified localities with above-average rates of tobacco use. This information will be used to determine the percentages of new enrollees in these areas when the 2024 enrollment data becomes available and will be included in the next report to be issued by January 1, 2025.
(*1) A tobacco surcharge is an additional amount added to the regular premium for individuals who use tobacco products. This extra charge is intended to account for the increased health risks and potential higher healthcare costs associated with tobacco use.