Employers to Dump Sickest Employees on Public Healthcare Exchanges?

The Patient Protection and Affordable Care Act healthcare reform regulations were passed more than a year and a half ago and, while implementation dates for various provisions are phased in over the next few years, employers and industry experts are already looking for ways to make the laws work in their best interest.

One strategy could be that employers will “maximize their benefit spend” by structuring their plan design in such a way that encourages an unhealthy population to come off their group plan and enroll in the public exchange system. If successful, this would dump the majority of the claims costs for an employer onto the public exchanges as employers would adversely select against the exchanges that are going to be subsidized by public funding.

This strategy would help the bottom line of any organization and is sure to make CFOs happy, but is it the best solution from a total rewards, workforce planning and compliance standpoint? If human resources, legal counsel and finance are not working together to tackle the tough healthcare reform decisions coming up within the next 24 months, odds are that a total business approach is not being taken. This could end up hurting the bottom line in different ways — internally through conflicts within senior management, and externally by not being able to recruit, reward and retain key workforce human capital.

Employers are encouraged to make sure they understand the PPACA rules and develop a plan of action that best fits the needs of their organization. Rather than taking a “wait and see” approach, organizations should stay ahead of the game by determining whether remaining grandfathered is important in their plans, making decisions on plan design and payroll contributions based on 2014 standards, and by evaluating requirements for minimum essential coverage.

Employers will also want to ensure they are being provided with accurate information on healthcare reform so they can make decisions that will allow them to best execute their benefit strategy in a cost-effective manner. Similarly, making sure they are proactive when it comes to benefits decisions is crucial to achieving desired strategic outcomes.

HCW Viewpoint

There are a number of strategies surrounding healthcare reform that we are following at Hill, Chesson & Woody. While we need to look for implementation guidance of the exchanges and other PPACA provisions that are going to be phased in over time, it is important that employers start to understand the potential ramifications so they can avoid missteps in their overall business goals.

Some employers may consider financially incenting employees to enroll in the exchanges as opposed to staying on their group plan. Others may benefit from dropping their plans altogether. Regardless, all decisions should be made with cross-functional leadership heads providing input so that multiple perspectives can be brought to the forefront.

When Medicare was first implemented, employers designed plans to force Medicare-eligible employees onto the government subsidized program. Eventually, Medicare needed to pass the Medicare Secondary Payer rules which made such an action illegal. However, up until its passage, employers were allowed to induce their Medicare-eligible employees to enroll in Medicare, rather than having this potentially high-risk population covered on their plan.

Employers will need to carefully consider how such decisions would interact not only with PPACA, but also with other regulations such as HIPAA and ERISA.

HCW is tracking healthcare reform very closely and working with clients to create our plans of action. We recommend that healthcare reform is incorporated into each employer’s overall benefit strategy.

If you have questions about healthcare reform or any other employee benefit topic, please feel free to call (919) 403-1986 or email info@hcwbenefits.com to start a discussion with one of our expert consultants.