Will Employers Dump Their Sickest Employees?
The worry over employers shedding employees onto the exchange is exactly right, but in a different way than almost everyone seems to think. The real risk is NOT that employers will completely drop coverage, leaving their employees to purchase coverage on the exchange. Instead, it is that employers will offer all employees revised plans that are specifically designed to induce ONLY THE LEAST HEALTHY employees to opt for coverage on the exchange.
See the rest of this and other links at Marginal Revolution.
Interesting speculation, and, unfortunately, it may be all too true.
I think this is wat a lot of people should start worrying about.
That could easily become an unintended consequence of the employer mandate. I can easily see employers quietly analyzing the impact of hiring someone with costly medical conditions — especially firms that self-insure.
I think the answer to your question is “yes”.
Ceertainly, the new law is going to create economic incentives for employers to dump their sickest employees on the exchange.
I guess the esteemed authors are not aware of the insurance premium tax subsidy small businesses may receive by providing insurance to their employees (25% non-profit / 35% for profit).
The qualifications are business with 25 or less full time or equivalent employees with an average salary of $50,000 or less.
Those businesses with the best benefits will attract the best employees. It is against their interest to discriminate which is illegal by the way.
Erik–the tax subsidy rules for small business subsidies cover less than 1/3 of small businesses. They only last 6 years and are outweighed by the 1099 requirements, the increased taxes on flow-through companies, and the increase in the cost of health insurance. They are probably outweighed by the cost of experts to figure out how to comply with the law.
You are mistaken about the role of benefits in attracting good employees. A lot of small businesses do very well and do not provide any benefits. Instead, they pay good employees above average wages and let them buy what they want privately.
You don’t need good benefits to attract good employees, you need good compensation.
In addition to Linda’s points, there is no subdidy that is large enough to pay the cost of catastrophic medical expenses — which for large employers cannot be shifted to someone else. So the incentive will be to avoid those health costs.
Both the progressive and the libertarian proposals seem to favor a collapse of the employer-sponsored group plans. Their post-collapse endgames may be very different, but I’m not sure that makes much practical difference.
The author spoke about placing the employer’s normal contribution in an HRA for those employees who buy exchange coverage.
In effect, this seems like 2 plans – first the HRA, and the secondary payer is the exchange.
For example, if the HRA has $25,000 in it for an employee,
then the deductible for the exchange coverage is $25,000?
If correct, is this legal under the legislation?
Don Levit