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Many people aren’t exactly clear on how insurance works in general, let alone the intricacies of the American health insurance industry. Most people’s basic understanding of insurance premiums is that everyone puts their money together, and if someone gets sick, some of that money goes toward their healthcare costs. The idea is that the majority of people will not be ill, and can subsidize the smaller subset that needs it. But what if people make poor health choices? If someone smokes cigarettes or doesn’t exercise, will that result in an increase in everyone else’s insurance premiums to cover the increased risk they present?

The oversimplified answer to this question is yes, but there are a lot of factors that go into it. Not everyone is placed into the same pool by insurance companies, and not everyone is charged the same for their premium. Things like preliminary questions help insurance companies sort people into risk brackets. That’s why they ask about things like smoking, exercise, drinking and medical history. This helps insurers separate people into sub-pools from the general public, because they have a higher risk. Their premiums would be higher to offset it, without affecting the otherwise healthy and standard-risk pool. It’s not just lifestyle choices like nutrition, smoking, or drinking that factors into your risk either. Things like age and zip code can also affect it.

How the Affordable Care Act (ACA) Affects Insurance Premiums

The Affordable Care Act allows for tobacco, age, and area ratings in determining health insurance premiums for individuals, but it is not required by all states. For example, New York does not allow a tobacco or age rating for individuals. However, in most states, smokers usually pay about 50% more for their premiums.

Some of these ratings are also optional, with employers and plans offering wellness incentives such as volunteering for biometric screenings where they measure your BMI and blood pressure and offer a tobacco questionnaire, to get a discount on your insurance premium. All of these factors go into offsetting the likelihood that you will have to subsidize someone else’s unhealthy lifestyle.

The Longer You Live, The More You Cost

In a more morbid outlook, studies have shown that preventing health risks like obesity and smoking can save lives, but it doesn’t actually save money in the long run. Everyone gets sick and needs healthcare periodically, but healthy people live longer, and thus need healthcare the longest, especially the elderly. “If you live longer, you cost the health system more,” says Pieter van Baal, an economist at the National Institute for Public Health and the Environment in the Netherlands.

Researchers have found that from ages 20 to 56, obese people had the most health care expenses. But the important thing to look at in this overall cost scenario is that smokers and the obese die earlier than the healthy group, so it actually costs less to treat them in the long run.  The longer people live, the more they pay into their health insurance, and the more they take out. When senior citizens become eligible for Medicare, the health challenges associated with aging consume the bulk of its expenditures.

So there’s no need to feel that your co-worker’s unhealthy lifestyle is taking more money out of your pocket via your shared company healthcare plan. If you take care of yourself and stay as healthy as you can, you’ll end up taking the most advantage of what everyone has paid in, far longer than anyone else.

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