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.
15 comments:
I'm not sure this is what is meant by stop-loss insurers but a while back I wondered if the following would work:
Under Obamacare, I can elect not to get coverage and pay a fairly small fine/tax - certainly less than coverage would cost me. Then if I get a condition like Alzheimer's or cancer or congestive heart failure, I just buy health insurance.
The risk is that I'll suffer some sudden condition: heart attack, stroke, hit by a bus. If I'm unconscious as a result, I'll incur huge medical expenses before I'm well enough to buy health insurance.
So I wondered if it would be possible to sell something called perhaps "Disaster Insurance". I sign up, pay a small annual fee, and - if I get hit with one of those sudden conditions - the Disaster Insurer signs me up for health insurance and pays whatever charges I incur before I'm signed up.
This would require that I keep insurance applications on file with the Disaster Insurer and that the DI have some type of arrangement with hospitals to be notified if I show up in their Emergency Rooms - or perhaps I wear something like a MedicAlert bracelet that says I'm a DI customer.
One more thing: Obama demonstrated conclusively during his run against Hillary Clinton that he was clueless about health care and insurance (and incapable of logic). Obamacare seems to suffer from the same flaws. It's fascinating to see how many utterly foreseeable problems are baked in the cake.
In fairness, though, he had almost nothing to do with the authoring of the law. He mostly stood around and looked pretty, according to the standards of the day.
Then if I get a condition like Alzheimer's or cancer or congestive heart failure, I just buy health insurance.
Maybe not anymore. There's a report out today that says the $5 billion appropriated under Obamacare for covering pre-existing conditions has run out of funds, and having taken 100,000 such folks, they're taking no more.
It also occurs to me that your SO, armed with a suitable power of attorney not too dissimilar from existing health powers of attorney, should be able to fill the square of DI. Of course those who are alone will need to locate another person for their powers of attorney.
As to the logic of Obama, you just don't understand. Magical thinking follows its own logic.
Eric Hines
Read that article closer: That was a stop gap measure to cover people until the provisions of the ACA kick in next year.
The real big thing is going to be the first large company that doesn't self insure, but just drops health insurance altogether, and just pays the fine. Then you will see, as I've seen it said, "A preference cascade". Lots of people are going to lose their health insurance and, mark my words, end up on medicaid.
As they say on FARK.com; "I work for an insurance company and I'm getting a kick out these replies." My company partnered with another insurance company to buy a third insurance company whose specialty is processing Medicaid claims. They're betting on where the money is going to be.
Heh. People have no idea what's coming down the pike.
I wish I could say that the fact that their total incompetence is looking more likely to destroy Obamacare from the inside made me feel better about everything.
Instead, it makes me more fearful for other things.
Elise, I believe what they mean by "stop-loss" insurance is just what an ordinary commercial insurer would call re-insurance. The employer says, "You, employee, will have a $200 deductible and I'll pay 80% of the rest of your costs, and promise that you'll never be out of pocket more than $10,000 in any one year" (to make up some parameters at random). The employer then tries to calculate how much cash reserves are reasonably necessary to cover the costs this is likely to generate in any particular year, considering the number of employees and their health profile. In this way, the employer is functioning just like an ordinary primary insurer, though probably with a smaller risk pool than most.
Then the employer goes to a stop-loss insurer and says, "What will you charge me to cover all my company's aggregate losses in any one year in case my estimate proves optimistic and my reserves fall short?" This is just what a primary insurer does: it farms out the risk, for a fee, that its actuarial calculations will have proved to be woefully inadequate. The smaller the primary insurance pool, the more the need for re-insurance or stop-loss insurance. Very small employers need a lot of help smoothing out their risks (for the same reason that the average nuclear family does). McDonald's probably doesn't need any, or if they do, they probably needn't pay much of a premium for it.
My household relies on very high deductibles. Essentially we're self-insuring for the level of healthcare we'll need in any year that doesn't include major surgery and an extended hospital stay. Our fairly affordable policy kicks in a catastrophe -- theoretically, since we've never yet had a year with such bad luck, despite brushes with various predictable major and minor illnesses. Self-insurance means we have savings to cover the costs of healthcare in any reasonably foreseeable year. It's the same as the way we self-insure our cars and have savings to cover the possibility that we'll put them in a ditch, but we use an insurer to cover us against the possibility of hitting someone else and putting him into the hospital for a year.
I think everyone is kind of missing the whole point of Obamacare. Clearly you CAN game the system and only purchase insurance when a long term medical emergency occurs (short term ones like "I've been hit by a bus" don't factor in as you're guaranteed medical treatment even without insurance currently), and in fact, that is the best option for pretty much anyone. Because it will be cheaper to do so. But what this will ultimately do is cause the insurance industry to collapse. Without being able to defray the cost of last minute buyers (those who need long term care but didn't pay into the system for years while healthy), they will rapidly go bankrupt. Thus, the 'ever benevolent' government will need to step in and provide single payer insurance for all citizens, since there won't BE a private option. And I honestly think that's the long term goal. They WANT socialized medicine, but know the American people are currently against the idea. But if you bankrupt the insurance companies, well... there's not much of an option, is there?
Thanks for the explanation, T99. Not what I was thinking about - although I still think there may be a market for DIs.
MikeD: I've heard that argument and it's certainly plausible. My resistance to it is based on not thinking the Democrats are that smart (not that they're stupid, they're just not that smart) and, again, on the abysmal ignorance about health care and insurance revealed by Obama. I know he didn't write the law but I have no reason to assume those who did were any more knowledgeable than he was.
All that said, we may well end up where you predict. Stupidity can be at least as deadly as malice aforethought.
Aren't DIs just high-deductible policies? I love them and would like to think there's a market for them, but I'll be penalized for using them, because they don't count as "real insurance" under Obamacare.
My old employer in AR, when they added health coverage in the late 90s, did so as a self-insurer. Premiums went up every year I as on it (poor guy who was enlisted to deal with it before there was a proper HR person would always say "we had a bad plan year"...) a few women on the plan have babies? Someone needed their gall bladder removed? It was always something....
Does ObamaCare also disincentivize health savings accounts? I know it lowers the limits for flexible spending accounts...
I have heard that it does, but I'm not sure. My impression is that they're out of favor -- remember the furor over the evil HSAs at Whole Foods? -- because they're more like catastrophic coverage and less like first-dollar pre-paid healthcare coverage.
Aren't DIs just high-deductible policies? I love them and would like to think there's a market for them, but I'll be penalized for using them, because they don't count as "real insurance" under Obamacare.
That's the interesting question. Technically, they wouldn't be health insurance policies at all. They would be "Failure To Sign Clients Up For Health Insurance In A Timely Fashion" policies. That is, the policy doesn't say it will pay my health care costs; it says it will sign me up for health insurance as soon as I need it. Should it fail to do so - for any reason, including my being hit by a bus - it will make good what it has cost me.
Tricky but I suspect it could be made to work.
Ah, got it now.
For some reason, I'm unusually distracted today. I seem to be missing about half of what everyone says to me.
...resistance to it is based on not thinking the Democrats are that smart (not that they're stupid, they're just not that smart)....
They don't all have to be. It only takes a few (or one in the right position) with the foresight and planning, and the loyal many, especially with their own political axes to grind/pent up goals to achieve that align sufficiently well with those few (that one), going along in order to get the environment set for the situation MikeD describes.
Clearly you CAN game the system and only purchase insurance when a long term medical emergency occurs....
This is a misunderstanding that's very widespread--including on the part of my few just above (although for them, under that theory, it's irrelevant). Once the long-term medical emergency has occurred, the outcome has been realized--there's no longer any risk to be transferred, which is what insurance is. Now the only valid set of premiums to be charged must equal the cost of the treatment, or the insurer loses money. The delta both represents welfare and applies pressure toward insurer bankruptcy, leading to MikeD's outcome.
Eric Hines
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