Health Reform Law to Upste Natural Balance

Published on 30 November 2011 by in Health Insurance Reform

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A shocking if not predictable research project by the University of Minnesota has identified a loophole in the health reform law that will allow employers to push their portion of health insurance premiums towards the government.

Essentially, hidden incentives in the current health care reform law will lead to employers pushing only their sick and older (higher premiums) employees to the exchange to bring down their overall premium or premium per employee average.  The only companies however that will “enjoy” the loophole are companies that self insure as companies that do not are forced to offer coverage to everyone.

The researchers are saying that unless the loophole is closed the financial viability of the exchanges will become unsustainable.  The exchanges which are the centerpiece of the Obama plan are intended to make it easier to comparison shop for health plans and also to expand access to coverage for the uninsured.  However, the exchanges should only be open to the self employed unemployed or those that are not offered coverage through their job.  Due to this loophole however the exchanges will also be open to those that are employed by companies that self insure.  Currently 6 out 10 workers that have health benefits get them from a self insured employer.
The one question that everyone had anyways even before this loophole was identified was if the health care reform law would incentivize employers to stop offering coverage entirely since they could instead send them to the exchange and pay a fine or be less competitive in the job market.
The point of this study at UM was to anticipate via data modeling, how companies would respond to the health reform law given the harsh economic environment and soaring health insurance costs.

There is some good news to the question of if employers would skip out entirely on insuring their employees and that is the data shows that most employers will offer coverage as opposed to paying the fines.

The bad news though that is the report will show that these plans offered by self insured companies will be structured to only appeal to healthy, low-risk employees by not offering benefits that the government exchanges or;

  • Limit the number of specialists in a provider network. The exchange could be more attractive to someone who needs a specialist for an expensive chronic condition.
  • Couple high premiums with discounts for participating in wellness programs. Employees who are not in the best of health may not want or be able to participate in wellness discounts, such as going to the gym three days a week.
  • Raise deductibles and co-pays. Substantial co-pays or deductibles are unattractive for someone who frequently sees a doctor for a chronic condition. High co-pays don’t matter as much for those who see a doctor infrequently.
The truth is that the higher health care costs and thereby health insurance goes, the more likely employers will be trim benefits to purge the unhealthy.  UM concluded that if the national plan was to change its loophole to resemble the Massachusetts plan it would solve the whole issue whereby workers who have access to employer insurance are not eligible for policies on the state exchange.

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