E-cigarettes create quandary for health insurers, policymakers

Are e-cigarettes, the popular battery-powered devices marketed as a smoking alternative, tobacco products?

How government regulators, insurance companies and customers each answer that question is key to deciding whether e-cigarette users will face higher health insurance premiums for their habit.

The Affordable Care Act allows insurers to tack on a higher premium to customers who use tobacco products. The charge can cost up to 50 percent of a client's premium and — more costly to some — cannot be subsidized by a federal tax credit.

But the 2010 law is silent on e-cigarettes, which were a nascent industry at the time, an omission that leaves insurers unsure how to view them and users in a precarious position.

Now the device has grown in popularity, with an estimated 20.4 million trying an e-cigarette sometime during 2013, said a government report.

E-cigarettes produce an odorless vapor that, like traditional cigarettes, contains nicotine. But federal regulators aren't sure whether to treat it as tobacco when it comes to advertising, banning sales to minors and when it comes to health insurance surcharges.

The Food and Drug Administration, which regulates cigarette smoking, has taken initial steps to suggest it will restrict e-cigarettes like other tobacco products but has yet to make a final ruling on the matter.

In the absence of federal guidance, insurance companies are essentially left on their own to decide whether e-cigarettes should be viewed the same way as traditional tobacco products.

"There's a little bit of a regulatory vacuum here that I think could allow an insurance company to kind of decide for itself how to approach this issue," said Sabrina Corlette, an attorney and professor at Georgetown University's Center on Health Insurance Reforms.

E-cigarette use has more than doubled since 2010 with an estimated 8 percent of adults having used the product at least once, according to the Centers for Disease Control and Prevention.

The center also found that frequent e-cigarette use (described as use at least every 30 days) has increased to 2.6 percent of adults last year from 1 percent in 2010.

The increasing popularity also has led entrepreneurs to take advantage of the market.

"The craze just took off just after we opened," Dean Hutton said.

The Huttons say they were the lone store in their immediate area at first and that business was good. But increased competition has since put pressure on their company, a sign they say points to e-cigarettes' increasing popularity.

But they say the federal regulation and the possibility of an insurance surcharge on their customers could be a threat to their business and ignores the fact that e-cigarettes don't contain tobacco.

"It has an ingredient that is in a tobacco product, but it is not a tobacco product," Kathy Hutton said. "It's frustrating. … It's like using the patch or the gum. It's just a different delivery system."

The Huttons were smokers — Kathy for 30 years, Dean for 18 — who now exclusively use e-cigarettes. They say the devices are a healthier, cheaper alternative to regular cigarettes, but that they wouldn't recommend a nonsmoker to start using them.

"Until electronic cigarettes are scientifically proven to be safe and effective, [we] will support the regulation of e-cigarettes and laws that treat them like all other tobacco products," the American Cancer Society says on its website.

Also complicating matters for e-cigarette users are current insurance applications. The applications typically only ask about tobacco use, but insurance brokers say e-cigarette users who answer "yes" to that question could make themselves liable for a surcharge.