Finding out what's in the law: We've been reading lately that companies are avoiding hiring a 50th employee, or cutting hours down to 29 per week, in order to escape Obamacare. It turns out it's even easier to escape the law, no matter what your size or average hours worked per week: just self-insure.
It seems Her Dignifiedness, Nancy Pelosi, let the PPACA slip through Congress with a carve-out for self-insured employers. Some of you may work for self-insured employers without realizing it, because although they serve as their own risk-capital pool for medical claims, they generally use an insurance company to administer the plan, which works much like other group plans at the employee interface. My old firm did that. They figured out what kind of reserves they could afford to set aside for the collective medical bills in a reasonably foreseeable year, and used the usual stop-loss insurance company to limit the firm's overall risk in case every single employee came down with cancer in the same year. As far as I was concerned, it was just Blue Cross until someone told me how it really worked. In essence, I was relying on the firm's solvency rather than Blue Cross's.
In the past, self-insurance was popular mostly with very large employers, but stop-loss insurers have been snapping up business from smaller and smaller employers for years now. The Obama administration is riled up, because self-insured employers can price their insurance on the basis of a small, homogeneous, often rather young labor pool. What's worse, under Obamacare, they don't even have to worry about what will happen to their employees with pre-existing conditions if they have to give the system up, because all those employees will be guaranteed access from now on if and when they leave the self-insured pool. Another sore point for the administration is that stop-loss insurers aren't subject to the ban on refusing coverage to people with pre-existing conditions. They can cherry-pick all they like before agreeing to take on a new employer as a client.
So self-insured employers may become the last corner of the health insurance market that responds to price signals. What it amounts to is traditional major-medical coverage for a group, at a time when the health czars are trying to get rid of major medical and replace it with first-dollar coverage, a/k/a prepaid healthcare. The employer can set employee-level deductibles wherever it likes, depending on how much compensation it chooses to pay in the form of insurance. It also sets stop-loss deductibles wherever it likes, depending on the premium it will have to pay to the re-insurer and the amount of risk it can stomach for a bad health year across its entire labor pool. This is not what our benevolent overloads had in mind for us at all, but unfortunately they don't have the House any more.
Chalk this up as one more piece of Obamacare that's about to bite them in the behind. Employers who are being threatened with being run out of business by the cost of healthcare are going to have an alternative. It may not be as easy as these guys thought it would be to crash the system and replace it with single-payer.