Question

Obesity and smoking are both linked to numerous adverse health consequences, including heart disease, cancer, and strokes, among others. The Affordable Care Act permits health insurance companies to charge people higher premiums if they smoke or are obese. But the law forbids the companies from charging higher premiums or denying coverage to people who have suffered strokes or have heart disease or cancer.

Can you suggest a rational argument why the law might be structured this way?

How could this be designed to affect a shift in the demand curve for soft drinks or cigarettes?

Answer 1

Obesity and smoking is a growing problem in America.Obesity in 1962 among Americans aged 20-74 years was 13-4%as compared to obesity in 2006 which was 35.1 %.Obesity and smoking has been connected to several chronic diseases like diabetes and heart disease and lower life expectancy.Obese people impose higher health cost on the rest of the population and so demands public policy intervention like increased health insurance premium.Since obesity and smoking are root causes of stroke and heart diseases higher premium on health insurance is charged .

The demand curve for soft drinks or cigarettes will shift to the left and demand will decrease .