Under health reform, will companies drop sick employees?

(Kin Images) For a while now, health reform advocates and opponents alike have ruminated about the idea of “employer dumping” under the new law: Instead of providing health insurance, companies would send their employees to purchase subsidized coverage on the new insurance marketplaces.

A slight wrinkle to that, first reported on by Minnesota Public Radio’s Elizabeth Stawicki, could prove even more troublesome for the health reform law: employers only dumping their sick employees into the health exchanges.

As University of Minnesota professors Amy Monahan and Dan Schwarz write in the Virginia Law Review, the Affordable Care Act says a lot about what individual health insurance plans will need to do. They will need to offer certain types of benefits, for example, and limit how much individuals pay for those benefits. But those requirements don’t apply to large companies that have “self-insured” plans that pay health providers directly for employees claims. About half of employers are self-insured, and, under the health reform law, they’re subject to much less regulation.

Those employers could “design plans that appeal to relatively young and healthy employees but are unattractive to high risk employees,” they write. “For example, an employer might provide very generous coverage of preventive, wellness and health maintenance services, while imposing large cost-sharing requirements that high-risk individuals are likely to utilize, such as hospitalization.” Limiting the number of specialist visits and raising co-pays are all pretty great ways to scare sick people away from your health insurance plan.

In a way, this could actually be more problematic for the health reform law than companies not offering insurance at all. In that case, all the employees — healthy and sick — end up buying coverage on the exchange. But if companies only push the sick employees onto the exchange, it screws things up for everyone else. It “undermines” the exchanges, as Monahan and Schwarz write, by making them “disproportionately risky relative to the general population.”

Massachusetts has avoided this problem by requiring all individuals who get insurance through their employers to sign up for it. Monahan and Schwarz also see a number of regulatory ways to address the issue within the Affordable Care Act that could play out; some doubt employers will even tread down this road. Perhaps what the study highlights the most is the uncertainty surrounding the health reform law: No one quite knows what happens when you introduce pretty big changes into the health insurance market as we know it.