Much of the recent buzz in the media on Obamacare has been a parroting of White House talking points that more young people than anticipated enrolled and that will be good for the demographic profile of the Exchanges. But frankly, age only means something because of the actuarially correct assumption that younger people are healthier. That assumption crumbles when there is a powerful financial incentive for self-insured employers to entice their sickest employees off of the employer plan and onto a PPACA Exchange.
I've personally become aware of a few of these cases already. And in a few months once insurers realize that they just enrolled, for example, a 24 year old who should generate less than $500 a year in claims but is generating near $1 million, we will start to see the premium response and we'll be well on our way to the unsustainable.
... Here's how it might work. The employer shrinks the hospital and doctor network to make the company plan unattractive to those with chronic illness. Or, the employer raises co-payments for drugs needed by the chronically ill, also rendering the plan unattractive and perhaps nudging high-cost workers to examine other options.
At the same time, the employer offers to buy the targeted worker a high-benefit "platinum" plan in the marketplaces. The plan could cost $6,000 or more a year for an individual. But that's still far less than the $300,000 a year that, say, a hemophilia patient might cost the company.
The employer might also give the worker a raise to buy the policy directly.
The employer saves money. The employee gets better coverage. And the health law's marketplace plan --required to accept all applicants at a fixed price during open enrollment periods -- takes on the cost.
"The concept sounds to[o] easy to be true, but the ACA has set up the ability for employers and employees on a voluntary basis to choose a better plan in [the] Individual Marketplace and save a significant amount of money for both!" says promotional material from a company called Managed Exchange Solutions (MES).
"MES works with [the] reinsurer, insurance carrier and other health management organizations to determine [the] most likely candidates for the program."
Charlotte-based consultant Benefit Controls produced the Managed Exchange Solutions pitch last year but ultimately decided not to offer the strategy to its clients, said Matthew McQuide, a vice president with Benefit Controls.
"Though we believe it's legal" as long as employees agree to the change, "it's still gray," he said. "We just decided it wasn't something we wanted to promote." ...For more on this topic on this blog see here, here, and here.
