Answer to Question #93946 in Economics for Emily Lewis

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?
Could this law be a better way to influence purchase of soft drinks rather than the tax the Bloomberg tried to enact? You must be sure to describe and explain Bloomberg’s prohibition.

Answer 1

A rational argument why the law might be structured this way is that it can decrease demand for soft drinks or cigarettes, but it doesn't harm people, who have problems with health affected by these products.

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

This law could be a better way to influence purchase of soft drinks rather than the tax the Bloomberg tried to enact.