Tuesday, May 20, 2014

2011 Law Review Paper Predicted Employers Would Dump High Cost Employees Into ObamaCare Exchanges

Will Employers Undermine Health Care Reform by Dumping Sick Employees? 
By Amy Monahan and Daniel Schwarcz
Virginia Law Review, March 2011

This Article argues that federal health care reform may induce employers to redesign their health plans so that high-risk employees opt out of employer-sponsored coverage in favor of insurance available on the individual market. It shows that, if properly designed, such an employer dumping strategy can promote the interests of both employers and employees by shifting health care expenses on to the public at large. Although largely overlooked in public policy debates, employer dumping of high-risk employees would expose individual insurance markets and insurance exchanges to adverse selection caused by the entrance of a disproportionately high-risk segment of the population. This, in turn, would increase the costs to the federal government of subsidizing coverage for qualified individuals and exempt more individuals from complying with the so-called individual mandate. The Article concludes by offering several potential solutions to the threat of employer dumping of high-risk employees. 
Read the full article.