Study: Under Obamacare, Employers Will Likely Engage in ‘Targeted Dumping’ of Employees
This is no surprise. In 2009 I was said repeatedly on my old college blog that ObamaCare was designed to blow up the system by driving prices and taxes up, by creating an impossible regulatory environment, and by a series of "incentives" that encourage people to make decisions that make the system less feasible as time goes on. Shortly after I said that ObamaCare creates an economic death spiral (known as an adverse selection spiral) of bad incentives that encourage people to game the system; each decision that you take for your own best interests helps to bankrupt the system.
The Weekly Standard:
Minnesota Public Radio reports, “A loophole in the federal health care overhaul would allow many employers to game the system by dumping their sicker employees [into] public health insurance exchanges, according to two University of Minnesota law professors.” Such “targeted dumping” of sicker employees would cause Obamacare’s taxpayer-subsidized exchanges to cost more — potentially far more — than the Congressional Budget Office (CBO) has projected.
The CBO has already badly misjudged the number of employees who would lose their employer-sponsored insurance under Obamacare. The CBO projected that, from 2010 to 2011, a net of 6 million Americans wouldgain employer-sponsored insurance in the wake of Obamacare’s passage (see table 4). But Gallup has found that, since President Obama signed Obamacare into law in March 2010, 4.5 million Americans have losttheir employer-sponsored insurance. In other words, the CBO’s estimate is off by about 10 million people already.
Some of this no doubt has to do with the historically bad economic “recovery” under Obama. But Obamacare likely has a lot to do with that as well.
In their study, published in the Virginia Law Review, authors Amy Monahan and Daniel Schwarcz write,
“[T]here is a substantial prospect that ACA [Obamacare] will lead some, and perhaps many, employers to implement a targeted dumping strategy designed to induce low-risk employees to retain ESI [employer-sponsored insurance] but incentivize high-risk employees to voluntarily opt out of ESI and instead purchase insurance through the exchanges that ACA establishes to organize individual insurance markets. Although ACA and other federal laws prohibit employers from excluding high-risk employees from ESI, these laws do little to prevent employers from designing their plans and benefits to incentivize high-risk employees to voluntarily seek coverage elsewhere. If successful, such a targeted dumping strategy would allow employers and low-risk employees to avoid the costs associated with providing coverage to high-risk employees….”
The authors note that employers who did this “would avoid any financial penalties under the so-called individual and employer ‘mandates.’”