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Can corporations shift targeted workers who have known high medical costs from the company health plan to public exchange (aka Marketplace/SHOP) based coverage created by the Affordable Care Act? Some employers are beginning to inquire about it and some consultants are advocating for it.
Health spending is driven largely by those patients with chronic illness, such as diabetes, or those who undergo expensive procedures such as an organ transplant. Since a large majority of big corporations are self-insured and many more smaller employers are beginning to research this as an option to help control their medical premiums, shifting even one high-cost member out of the company health plan could potentially save the employer hundreds of thousands of dollars a year by shifting the cost for the high-cost member claims to the Marketplace/SHOP plan(s).
It is unclear if the health law prohibits this type of action, which opens a door to the potential deterioration of employer-based medical coverage.
An employer “dumping strategy” can help promote the interests of both employers and employees by shifting health care expenses on to the public through the Marketplace.
It’s unclear how many companies, if any, have moved any of their sicker workers to exchange coverage yet, which just became available January 1, 2014, but even a few high-risk patients could add millions of dollars in claim costs to those Marketplace plans. The costs could be passed on to customers in the next year or two in the form of higher premiums and to taxpayers in the form of higher subsidy expenses.
A Possible Scenario
Here’s an example of how an employer “dumping-situation” it might work:
At renewal, an employer reduces the hospital/doctor network on their medical plan to make the company health plan unattractive to those with chronic illness or high cost medical claims. Or, the employer could raise the co-payments for drugs or physician visits needed by the chronically ill, also making the health plan unattractive and perhaps nudging high-cost workers to examine other options available to them.
At the same time, the employer offers to buy the targeted worker a high-benefit “platinum” plan in the Marketplace. The Marketplace/SHOP plan could cost $6,000 or more a year for an individual in premiums, but that’s still far less than the $300,000 a year in claim costs that a hemophilia patient might cost the company.
The employer could also give the worker a raise so they could buy the Marketplace/SHOP policy directly.
In the end, the employer saves money and the employee gets better coverage. And the Affordable Care Act marketplace plan, which is required to accept all applicants at a fixed price during open enrollment periods, takes over the costs for their chronic illness/condition.
Some consultants feel the concept sounds too easy to be true, but the ACA has set up the ability for employers and employees to voluntarily choose a better plan in the Individual Marketplace which could help save a significant amount of money for both.
Legal but ‘Gray’
The consensus among insurance and HR professionals is that even though the employer “dumping-strategy” is technically legal to date (as long as employees agree to the change and are not forced off the company medical plan), the action is still very gray. This is why many employers have decided this is not something they want to promote at this time.
Shifting high-risk workers out of employer medical plans is prohibited for other kinds of taxpayer-supported insurance. For example, it’s illegal to persuade an employee who is working and over 65 to drop company coverage and rely entirely on the government Medicare program. Similarly, employers who dumped high-cost patients into temporary high-risk pools established originally by the ACA health law are required to repay those workers’ claims back to the pools.
One would think there would be a similar type of provision under the Affordable Care Act for plans sold through the Marketplace portals, but there currently is not.
The act of moving high-cost workers to a Marketplace plan would not trigger penalties under ACA as long as an employer offers an affordable medical plan to all eligible employees that meets the requirements of minimum essential coverage, experts said. If workers are offered a medical plan by their employer that is affordable coverage and meets the minimum essential coverage requirements, workers cannot use tax credits to help pay for the Marketplace-plan premiums.
Many benefits experts say they are unaware of specific instances where employers are shifting high-cost workers to exchange plans and the spokespeople for AIDS United and the Hemophilia Federation of America, both advocating for patients with expensive, chronic conditions, said they didn’t know of any, either.
But employers are becoming increasingly interested in this option.
This practice, however, could raise concerns about discrimination and could cause decreased employee morale and even resentment among employees who are not offered a similar deal, which could end up causing the employer more headaches and even potential discrimination lawsuits.
Many believe that even though this strategy is currently an option for employers, in the end, it may not be a good idea. This type of strategy has to operate as an under-the-radar deal between the employer and targeted employee and these type of deals never work out. Most legal experts who focus on employee benefits do not recommend this strategy either as it just opens the door of discrimination claims from employees.
Please contact our office for assistance in reviewing all of the benefit options available to your company and employees under ACA.
Imagine you are home cooking dinner on a Saturday night and you suffer a minor burn. You can not decide if the burn is serious enough to go to the Emergency Room or how exactly to care for the burn. Did you know that most major insurance carriers offer their members 24/7/365 access to a free Nurse Hotline for situations just like this?
These Nurse Hotlines help provide a free nurse to members who can help the member evaluate the best type of care for their situation (i.e. if they should go to the ER to have their burn looked at or if a home remedy will suffice). They can also offer members additional information on chronic conditions they suffer from, support when coordinating follow up care, or help direct them to other programs their insurance carrier may offer (i.e. weight loss discounts or free breast pumps to expectant mothers).
For more information on your insurance carrier and if they offer this program, please contact our office.
According to a recently released by Gallup-Healthways Well-Being Index, lost productivity due to workers’ poor health is costing the U.S. approximately $84 billion a year.
On average, 77% of workers either had one or more chronic conditions or had a higher-than-normal body mass index (BMI), according to the Gallup index, which surveyed 94,366 American adults working in 14 occupational categories. The respondents with chronic conditions or a high BMI reported missing work about one-third of a day more each month, on average, than those workers with a normal BMI and no chronic conditions. That lost time costs U.S. businesses from $160 million a year for agricultural workers to $24.2 billion a year for white collar professionals.
The index, conducted from Jan. 2 – Sept 10, 2012, asked respondents if they had ever had a health condition such as asthma, cancer, depression, diabetes, heart attack, high blood pressure, high cholesterol, or recurring physical pain in the neck, back, knee, or leg.
The index collected data from the respondents on their height and weight so researchers could calculate their BMI. Respondents were classified as “obese” if they had a BMI of 30 or higher, as “overweight” if they had a BMI of 25-29, or as “normal” if they had a BMI of 18.5-24.9.
The 14 occupational categories that researchers examined were: professionals (excluding physicians, nurses, and teachers), management, services, clerical or office, sales, school teaching, nursing, transportation, manufacturing or production, business ownership, installation or repair, construction or mining, physicians, and agriculture.
86% of transportation workers had higher than normal BMIs or at least one chronic condition- the highest among the 14 categories. They reported missing 0.41 more work days a month than their healthier counterparts.
“This amounts to an estimated $3.5 billion in absenteeism costs per year that would be recouped” if employees were not overweight or had not been diagnosed with a chronic condition, researchers wrote.
As employers increasingly engage in improving the health of their workers, including implementing and strengthening the effectiveness of wellness programs, there are substantial potential savings that remain on the table from getting more employees to work each day as their health improves over time.