Under Obamacare, insurers can charge smokers up to 50 percent higher premiums to offset their risk.
But another provision prevents insurers from charging older customers more than three times what they charge the youngest adults in the pool.
The conflict has led to a system in which a 65-year-old smoker's premium can't be processed if it is more than three times the premium of a 21-year-old smoker.
Until the system is updated, the Obama administration suggested insurers limit the penalties across all age groups, citing a Department of Health and Human Services report that proposed a 20 percent penalty.
Experts say older smokers are more likely to benefit from the glitch, but some are concerned that insurance companies could end up charging the full penalty across the board, resulting in higher premiums for young people.
Premiums for a standard mid-level insurance plan would be about $9,000 a year for a 64-year-old non-smoker -- before any tax credits -- according to the Kaiser Health Reform Subsidy Calculator.
For a smoker of the same age, the full penalty would bring the policy to more than $13,500, which could not be offset by tax credits.
This latest glitch comes just a week after the administration announced a postponement of employer fines for not offering coverage. The new health insurance exchanges are set to launch October 1.
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