Yes, I see where it goes. Either premiums would rise on the basis of lifestyle, or supplementary health insurance companies would pick up the slack. Your choice to smoke, have unprotected sex, or BASE jump would come with additional costs, which would be in addition to the cost of the cigarettes, wingsuits, etc - rather than being an externality which society pays.

Note that we already do this for life insurance, and fully accept doing so. You cannot even get a short term policy without a blood test. Why should health insurance be any different?