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Can corporations shift targeted workers who have known high medical costs from the company health plan to public exchange (aka Marketplace/SHOP) based coverage created by the Affordable Care Act? Some employers are beginning to inquire about it and some consultants are advocating for it.
Health spending is driven largely by those patients with chronic illness, such as diabetes, or those who undergo expensive procedures such as an organ transplant. Since a large majority of big corporations are self-insured and many more smaller employers are beginning to research this as an option to help control their medical premiums, shifting even one high-cost member out of the company health plan could potentially save the employer hundreds of thousands of dollars a year by shifting the cost for the high-cost member claims to the Marketplace/SHOP plan(s).
It is unclear if the health law prohibits this type of action, which opens a door to the potential deterioration of employer-based medical coverage.
An employer “dumping strategy” can help promote the interests of both employers and employees by shifting health care expenses on to the public through the Marketplace.
It’s unclear how many companies, if any, have moved any of their sicker workers to exchange coverage yet, which just became available January 1, 2014, but even a few high-risk patients could add millions of dollars in claim costs to those Marketplace plans. The costs could be passed on to customers in the next year or two in the form of higher premiums and to taxpayers in the form of higher subsidy expenses.
A Possible Scenario
Here’s an example of how an employer “dumping-situation” it might work:
At renewal, an employer reduces the hospital/doctor network on their medical plan to make the company health plan unattractive to those with chronic illness or high cost medical claims. Or, the employer could raise the co-payments for drugs or physician visits needed by the chronically ill, also making the health plan unattractive and perhaps nudging high-cost workers to examine other options available to them.
At the same time, the employer offers to buy the targeted worker a high-benefit “platinum” plan in the Marketplace. The Marketplace/SHOP plan could cost $6,000 or more a year for an individual in premiums, but that’s still far less than the $300,000 a year in claim costs that a hemophilia patient might cost the company.
The employer could also give the worker a raise so they could buy the Marketplace/SHOP policy directly.
In the end, the employer saves money and the employee gets better coverage. And the Affordable Care Act marketplace plan, which is required to accept all applicants at a fixed price during open enrollment periods, takes over the costs for their chronic illness/condition.
Some consultants feel the concept sounds too easy to be true, but the ACA has set up the ability for employers and employees to voluntarily choose a better plan in the Individual Marketplace which could help save a significant amount of money for both.
Legal but ‘Gray’
The consensus among insurance and HR professionals is that even though the employer “dumping-strategy” is technically legal to date (as long as employees agree to the change and are not forced off the company medical plan), the action is still very gray. This is why many employers have decided this is not something they want to promote at this time.
Shifting high-risk workers out of employer medical plans is prohibited for other kinds of taxpayer-supported insurance. For example, it’s illegal to persuade an employee who is working and over 65 to drop company coverage and rely entirely on the government Medicare program. Similarly, employers who dumped high-cost patients into temporary high-risk pools established originally by the ACA health law are required to repay those workers’ claims back to the pools.
One would think there would be a similar type of provision under the Affordable Care Act for plans sold through the Marketplace portals, but there currently is not.
The act of moving high-cost workers to a Marketplace plan would not trigger penalties under ACA as long as an employer offers an affordable medical plan to all eligible employees that meets the requirements of minimum essential coverage, experts said. If workers are offered a medical plan by their employer that is affordable coverage and meets the minimum essential coverage requirements, workers cannot use tax credits to help pay for the Marketplace-plan premiums.
Many benefits experts say they are unaware of specific instances where employers are shifting high-cost workers to exchange plans and the spokespeople for AIDS United and the Hemophilia Federation of America, both advocating for patients with expensive, chronic conditions, said they didn’t know of any, either.
But employers are becoming increasingly interested in this option.
This practice, however, could raise concerns about discrimination and could cause decreased employee morale and even resentment among employees who are not offered a similar deal, which could end up causing the employer more headaches and even potential discrimination lawsuits.
Many believe that even though this strategy is currently an option for employers, in the end, it may not be a good idea. This type of strategy has to operate as an under-the-radar deal between the employer and targeted employee and these type of deals never work out. Most legal experts who focus on employee benefits do not recommend this strategy either as it just opens the door of discrimination claims from employees.
Please contact our office for assistance in reviewing all of the benefit options available to your company and employees under ACA.
Does your company currently use forms created more than three years ago that asks for information about an applicant or an employee’s family medical history?
Do your supervisors and managers know that if they are “friended” by an employee on a social media site and they see medical information relating to the individual or the individual’s family member, they have violated a federal law and subjected the company to liability?
Has your company failed to update Family Medical Leave Act (FMLA), Americans with Disabilities Act (ADA), workers’ compensation, no-harassment, and other policies and procedures to comply with the Genetic Information Nondiscrimination Act (GINA)?
If you answered yes to any of these questions, you should review the impact of GINA so your company does not become the next GINA “headline.”
What Is GINA?
The Genetic Information Nondiscrimination Act (GINA) has been an active federal law for five years now. However, many employers still know little about the law. Enacted in 2008, GINA generally prohibits employers from engaging in three types of conduct:
Most attribute GINA’s enactment and requirements as a response to a trend in which employers sought to rely on genetic information in an attempt to screen out potentially unhealthy employees to help control their surging health care costs.
Inadvertent Collection Of Genetic Information
Many employers today pay little attention to GINA on the mistaken assumption that they do not collect genetic information. But there are three very common situations in which an employer can unknowingly collect genetic information.
First, employers regularly request medical documentation to support a potentially disabled employee’s request for a reasonable accommodation.
Second, employers regularly request medical documentation to support an employee’s request for leave under FMLA.
Third, many employers require a medical examination upon hire and, as a result, receive medical information in that context.
In each of these situations, the employer might acquire genetic information (without intentionally requesting it) and would violate GINA as a result of doing so. Fortunately, GINA provides a “safe harbor” that can protect an employer in such situations.
How To Avoid Noncompliance
When an employer requests medical information, it must warn the provider not to provide genetic information. When the employer makes such a warning, the “safe harbor” provision provides that any receipt of genetic information in response to their request will be deemed unintentional and not in violation of GINA.
As a result, it is imperative that employers include this specific warning any time that they request health-related information from a health care provider or an employee.
Of course, an employer could also obtain genetic information in a less formal situation. For example, a supervisor could obtain genetic information about an employee during a casual conversation, through email, or through social media. As long as the supervisor does not ask follow-up questions and does not take any employment-related action based on the accidentally acquired info, this information would be deemed unintentional. However, the use or disclosure of the accidentally acquired information would still violate GINA.
Does Your Wellness Program Violate GINA?
The federal regulations also make clear that an employer does not violate GINA if the employer requests genetic information as part of a “voluntary wellness program.”
For such a program to be deemed voluntary, the employer must show that:
Another reason that employers may be less knowledgeable about GINA (as compared to other federal laws) is that relatively few lawsuits have be filed since the law was enacted. According to EEOC statistics, there were just 280 charges of GINA-related discrimination filed in 2012, or around 0.3% of the overall charge filings for that year. However, the number of filed, GINA-related charges has increased by nearly 40% since the first year an individual could file under the statute.
Moreover, recent activity by the EEOC suggests that it would be best if employers begin reviewing their procedures now and taking the necessary steps to ensure they are GINA compliant.
Unknowing or unintentional violations of GINA are perhaps the most worrisome type of violations since they are the most likely to occur. This is particularly true for employers that rely on dated, pre-GINA human resources documents (including employment applications) or employment policies.
Employers should update existing nondiscrimination and anti-harassment policies and handbooks so that discrimination/harassment on the basis of genetic information is clearly prohibited. Similarly, employers should also update their Family Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) forms to include the requisite “safe harbor” language that warns employees and health care providers not to provide genetic information.
Employers also should ensure that an employee’s medical information is maintained separately from the employee’s personnel file, as required by the law.
For further information on GINA and its impact on your business or for assistance on insuring your company is GINA compliant, please do not hesitate to contact our office.