More Chaos

“The new health care law created powerful incentives for smaller employers to self-insure,” said Deborah J. Chollet, a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.”…

Stop-loss insurers can and do limit the coverage they provide to employers for selected employees with medical problems. As a result, companies with less healthy work forces may find self-insuring more difficult…

Insurance regulators worry that commercial insurers — and the insurance exchanges being set up in every state to offer a range of plan options to consumers — will be left with disproportionate numbers of older, sicker people who are more expensive to insure.

That, in turn, could drive up premiums for uninsured people seeking coverage in the exchanges. Since the federal government will subsidize that coverage, it, too, could face higher costs, as would some employees and employers in the traditional insurance market.

Full article on companies self-insuring in response to ObamaCare.

Comments (6)

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  1. Studebaker says:

    Why don’t we go back to the Good Ol’ Days when people took care of themselves and self-insured for their day-to-day medical needs and only had insurance for catastrophic medical needs. Then maybe it wouldn’t matter as much whether an employee risk pool had healthy workers willing to be gouged so older, sicker (richer) employees get a free ride.

  2. Gabriel Odom says:

    Let’s not forget that the reason companies started handing out health benefits was because the federal government set a price ceiling on wages to combat inflation.

    With solutions from the government, who needs problems?

  3. Linda Gorman says:

    If this article is to be believed, small employers with no experience in administering health benefits are going to provide ObamaCare compliant plans at lower cost than companies that specialize in it.

    And, multiple small groups have the same risk as one large one, or something. Plus, all of this is going to hurt the exchanges because they have to broker plans to fewer people, or something.

    Anyone else as confused as I am?

  4. Don Levit says:

    Linda makes a lot of sense amidst the confusion!
    Several times in the commentaries on the regulations, the importance of adverse selection against the exchanges is discussed.
    The references have been made to qualified health plans sold outsude the exchange.
    If this article DOES make sense, I can foresee the government stepping in to protect the exchanges, such that no plans will have any significant price advantage due to health status.
    That is one of the main tenets of the PPACA – premiums can differ due to a few characteristics, one of which is not health status.
    Don Levit

  5. Buster says:

    @ Linda

    If this article is to be believed, small employers with no experience in administering health benefits are going to provide ObamaCare compliant plans at lower cost than companies that specialize in it.

    I suppose it depends on your definition of small employers. Firms employing 50 workers or less will be far better off not even offering health coverage –- especially if most of their workers would qualify for an exchange subsidy. For firms of this size, there is no penalty for failing to offer health coverage.

    For firms that employ 51-100 workers, is probably not worth the marginal cost to self-insure in an attempt to avoid complying with the ACA’s costly mandates. However, firms that employ more than 100 workers (I’m picking an arbitrary number to make my point) may be large enough to self-insure and large enough to feel the bite of costly mandates.

    This makes sense for small firms with a relatively stable workforce of healthy professionals, who don’t qualify for exchange subsidies (e.g. think of a law firm or accounting firm employing large numbers of young professionals). Far from being unethical, I think every firm should do their best to lower the cost of employee coverage and reduce cross subsidies.

  6. H. James Prince says:

    Would anyone be interested in starting a health insurance firm? Seems like the perfect time – no one actually knows how much insurance should cost, so we could get away with practically any price.