Another Way Employers Could Dump Coverage
Yesterday NPR ran a story about two Minnesota law professors who recently wrote a law review article about yet another unintended consequence of Obamacare – one which could result in employers “selectively dumping” their high-risk, and therefore high cost, employees into Exchanges. The article argues that employers could engage in benefit management strategies – wellness discounts, tight networks of specialists – that encourage healthy, low-risk individuals to participate in the group plan, while encouraging unhealthy workers to rely on Obamacare’s Exchanges. Employers could also give their workers cash incentives – in the form of Health Reimbursement Arrangements or other compensation – to minimize financial losses. Even if high-risk workers migrating to Exchanges could not receive federal insurance subsidies (because their employer was still offering coverage), workers could still come out ahead – after all, a firm who knows a worker will incur $50,000 in health expenses annually would be MUCH better off financially to send that employee to the Exchange, even if the firm paid the full $15,000-$20,000 cost of that worker’s insurance policy on the Exchange.
Of course, federal taxpayers would be worse off under this scenario; the article notes that any attempt by employers to offload their costliest employees could result in significant costs to the federal government:
Employer dumping of high-risk employees could undermine the exchanges on which individual markets are expected to operate by rendering the pool of policyholders seeking coverage in exchanges disproportionately risky relative to the general population. Such adverse selection, in turn, would simultaneously increase premiums, lower coverage rates, and increase the cost to the federal government of subsidizing coverage for low- and moderate income individuals. Ultimately, these forces could render insurance exchanges unsustainable…
Given all this, it’s a bit surprising that senior HHS officials have said it would be a good thing for employers to “dump [their] people into the Exchange,” and that Speaker Pelosi talked favorably about Obamacare as a way “for businesses to be emancipated from health care costs because they have a way out or whatever works for them.” Regardless, the law review article is yet another way in which Obamacare is turning out to misfire on the promises Democrats made – and backfiring on the American people.