How Small Business May Escape the Effects of ObamaCare
UnitedHealth Group Inc. and Humana Inc. will begin offering smaller employers — including firms with as few as 10 members in UnitedHealth’s case — the option of so-called self-insurance in some markets later this year. Self-insured businesses pay their workers’ medical costs directly, instead of joining a traditional managed-care plan. Usually, they hire benefits firms or insurance companies just to administer their plans.
Most big companies choose the approach, because it gives them more control over benefits and can lower costs.
For small businesses, being self-insured would let them avoid new requirements under the law that call for traditional small group plans to include richer benefits, such as mental-health and maternity care. Self-insured companies can also avoid changes to pricing rules that could increase costs for groups of healthy workers. (WSJ)
Just another way small businesses are finding ways to work around the law. Wonder if this will have any consequences?
As long as the individual in the small company isn’t getting shafted, then this is fine. I am afraid this new law will eventually cause companies to revolve their benefit packages around avoiding costly provisions from the ACA.
This seems like it could have some major problems. What happens when an individual employees medical expenses become a very large portion of costs or cut into profits?
The article address this:
“It comes with risks: A car accident or cancer case can leave small businesses on the hook for big medical bills. That is why most large insurers have generally offered such services to companies that have 100 or more workers and can spread the costs around.”
It talks about how the regulation is changing the cost benefit calculation. In other words how policy is changing behavior perhaps for the worse.
This sounds like a familiar tune:
“If more healthy companies …effectively opt out of the exchanges, that leaves their less-healthy counterparts on the exchanges. And that could push up premiums in the marketplaces, regulators say.”
“For small businesses, being self-insured would let them avoid new requirements under the law that call for traditional small group plans to include richer benefits, such as mental-health and maternity care.”
– Maybe small businesses aren’t finished by Obamacare yet?
I understand that when small businesses self-insure, the responsible broker arranges re-insurance at an attachment point before the company goes bankrupt. For example, an 85-person company might self-insure to an attachment point of one million dollars, after which reinsurance would indemnify.
However, there is no guarantee that such reinsurance is being bought in these cases. The tragedy occurs when the small employer suffers catastrophic health costs that cause it to go bankrupt. In that case, there is no COBRA for the employee to continue. He loses his coverage immediately, because there is no actual insurance.
Furthermore, ERISA lawsuits have made it clear that the employer is not bound by state insurance law. That is, the employer cannot be held liable for not paying a claim that is medically necessary.
If the carriers themselves, i.e. UNH and Humana, are making these arrangements themselves, it means that brokers have been successful at negotiating the arrangements.
Workers are surely unaware of the risks being thrust upon them.
This could cause major discrimination among small businesses to those with mild health issues, because they won’t want to hire people with healthcare needs, so they will discriminate against certain demographics which prohibits the expediency of job growth.
This policy choice could bankrupt many small businesses if certain employee’s get any type of life threatening disease.
This also has the potential to increase law suit against small companies, if there ever was a lack of care.
This is an interesting concept. Firms that self-insure can buy stop loss coverage for both the unlikely event an employee’s cost exceed a certain level; and if the entire group’s cost exceeds a certain level. In the past, many firms didn’t do this because it was so complicated. If I employed a healthy group of, say, 50 people, it sounds like an idea worth pursuing.