A potential loophole in the Affordable Care Act could spell trouble for the HIX marketplace if enough group health plans are able to steer sicker employee populations to public exchanges while holding onto healthier lives.
The approach, an apparent end run around the ACAs anti-dumping provisions, reportedly has captured the attention of some midsize companies that self-insure. At issue is whether employers can legally -- and practically -- offer financial incentives to covered lives to help manage their risk.
Proponents argue that the choice remains with employees and no one is forcing their hand. While the practice might sound appealing to certain organizations, however, there could be multiple complications.
Any such offer must be made across the board to all employees, explains Ron E. Peck, SVP and general counsel with the Phia Group, LLC in Braintree, Mass., adding that an offer for cash in exchange for non-enrollment to some employees but not others is discrimination.
Offering cash in lieu of benefits has become a very popular idea in light of the health care exchanges, he says, noting that such payoffs frequently take shape as an exchange premium payment plus a bonus. Paying the HIX premium, however, does not fulfill the employers pay-or-play requirement, according to Peck.
One obvious roadblock is
He also cautions that encouraging employees to opt out of their employer-provided plan with an incentive to seek HIX coverage could actually backfire for self-insured plan sponsors, siphoning off healthy lives and leaving behind a sicker population.
While claims data can reveal when someone has incurred a costly service, Peck says attempting to determine what conditions or predispositions will affect future spending would clearly violate anti-discrimination laws and the Genetic Information Nondiscrimination Act of 2008.
How do you dig deeply enough into a persons genetic makeup to confirm that they will be costly in the future, not just in the past? he wonders. Peck says that its also worth noting that someone who cost the plan a substantial amount of money one year could cost nothing the following year.
Employers cannot strong-arm chronically ill employees on their health plans into high-risk insurance pools meant for individuals with pre-existing health conditions under the ACA. But the problem is that this directive is missing from rules that govern HIX coverage.
Its almost like they forgot to include that clause on the exchange side of the equation, John L. Barlament, an attorney with Quarles & Brady, recently told Bloomberg Businessweek.
A spokesman for the Centers for Medicare and Medicaid Services was quoted in that same article as saying that while ERISA does bar benefits discrimination, it doesnt address whether an agreement can be made allowing employer-provided coverage to be voluntarily declined so that an employee can pursue a more favorable arrangement. To wit: a HIX subsidy with a cash benefit from their employer.
Another issue involves the possibility of retribution. If an employee declines an offer to leave the plan and is later fired for performance issues, Peck says the individual could accuse the employer of retributive termination.
If the objective is to steer older employees to another vehicle for obtaining health insurance coverage, then there are caveats to consider along the way. Peck says the Medicare Secondary Payer Act prohibits a plan from encouraging participants to enroll in Medicare. In a post-health care reform climate, he believes it is not inconceivable that a similar statute will eventually be passed that prohibits a plan from incentivizing employees to move to the exchange.
Any incentives to terminate plan eligibility also must be worthwhile enough from a post-tax standpoint for employees to feel theyre receiving a valuable commodity without it exceeding what the employer otherwise would be spending on coverage for that individual, he adds.
