Can Employers Pay Workers to go Into the Exchange?

employer coverage 300Put yourself in the position of an employer that’s looking to save money on the health coverage you offer your workers. Wouldn’t it be great if your costliest employees declined that coverage and instead bought insurance on an exchange?

Heck, you’d be willing to pay your sickest employees to refuse coverage. On average, your share of a family’s health plan comes to almost $12,000. Your costliest employees are even more expensive to cover. What if you offered those employees a $6,000 bump in wages if they declined coverage? You’d still come out ahead — and, now that the ACA is up and running, your employees might be better off, too. They could buy comparable health insurance through an exchange and, if the tax credits are rich enough, even pocket some of the $6,000. You win, your employees win. Only the federal government, which pays for the tax credits, loses.

More from Nicholas Bagley at the Incidental Economist.

Comments (19)

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  1. Matthew says:

    I am most certainly in favor of anything in which everyone is a winner except for the government.

    • Walter Q. says:

      Yet under this, the true winner would really only be the employers. Employees will have to take exchange coverage, which is likely costlier and worse quality.

      • Andrew says:

        Unless of course this is when employees start to opt to work less, qualify for government subsidies and come out ahead.

    • Jay says:

      If my dreams came true…

  2. Thomas says:

    “now that the ACA is up and running, your employees might be better off, too”

    I highly doubt employees who were eligible to have employer insurance would benefit from ACA. These are generally middle class earners, and ACA only really benefits low class earners.

  3. James M. says:

    Hopefully this isn’t what ACA comes to. The narrow networks that the exchange plans run on will be a detriment to healthcare. Most people would rather get their insurance through their employer, and would most likely benefit most from this as well.

  4. Bob Hertz says:

    I thought there was a law which prevented employees from getting a subsidy if their employer offered affordable coverage.

    Secondly, in some small businesses the least healthy are the owner or a relative of the owner.

    If this person is over 60, any policy they find on the exchanges will be far more than $6000 a year for family coverage.

    • Barry Carol says:


      You’re correct. If an employee has access to affordable health insurance through an employer, he is NOT eligible for a subsidy to purchase a subsidized policy on one of the public exchanges instead. Moreover, the definition of affordable in this context is that the employee’s share of the premium for SINGLE COVERAGE must be less than 9.5% of pretax income. Even if he actually needs family coverage, the ACA affordability criteria are based on single coverage.

      Allowing the sick to buy health insurance coverage at subsidized rates through an exchange even if they have access to affordable employer coverage is an obvious potential loophole / abuse that the crafters of the law anticipated.

  5. Lance says:

    What a shot. I like it.

  6. Adrian R says:

    But if the Federal Government loses, we all lose. It seems as if the health insurance industry is lose-lose situation. Every participant loses. Insurance companies are apparently operating at a loss due to the mispriced premiums. The federal government is losing because they are forced to pay lots of money in tax credits plus editing the law to be applicable. Doctors are being underpaid and forced to spend most of their time with clerical work. Finally the biggest loser is the consumer. They pay high taxes, high cost of insurance, receive mediocre treatment and they seem to be the party that everyone ignores.

  7. Andrea E says:

    If I were the employee I would demand higher compensation from my employer to reject the company provided insurance and settle for the plans offered in the exchanges. Not only would I know how much the company is saving, but I believe that the plans in the exchanges are much worse than the ones an employer can provide.

    • Buddy says:

      Exactly, if there are no benefits, then there certainly better be higher wages.

      • Dupree says:

        Oh, certainly (lol). At any rate, any increase in pay means a smaller subsidy for you in the exchange, if you get one at all.

    • Dupree says:

      Pending Non-discrimination rules means your employer will not be allowed to give YOU a special deal.

  8. Kat D says:

    I don’t know the legal portion of this, but I believe this measure may lead to several legal issues. At the end the employer is discriminating their employees. The sole fact that they are selected and offer money, might be taken as profiling. It sounds like a good opportunity for employers, but I don’t think is a viable alternative.

  9. Suzy says:

    It’s almost as if the drafters of this law wanted everyone in the exchanges…

  10. Dupree says:

    A lot of employers thought they would be able to do this with their ENTIRE workforce. The kicker is, any extra income changes an individuals Adjusted Gross Income, which changes their eligibility for subsidies, which are calculated based off the second lowest cost silver plan available (eg. crap), and the premiums paid to the exchange are after-tax. Even the employer loses the FICA savings, on money they are now paying as wages.

  11. Bob Hertz says:

    Dupree is right. Giving the employee an extra $6000 may in some cases take them right out of subsidies!

    And here is another kicker.

    An employer is not supposed to know which employees are the costliest to insure. Look at the recent flap at AOL, where the company president lit out after the parents of premature babies.

    I mean colloquially, it is not hard to ascertain an expensive employee when someone takes off a month for cancer surgery…….but legally it is problematic.