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Large Employers Could Game the Exchanges for Big Savings

There are a lot of moving parts here.

There is the possibility that some companies could start encouraging their most expensive employees to move to the new Affordable Care Act exchanges. This move would save them a large amount of money but drive up premiums on the exchanges and increase what the government needs to spend on subsidizes.

Over at Kaiser Health News they lay out how exactly such a scheme could work. From KHN:

Here’s how it might work. The employer shrinks the hospital and doctor network to make the company plan unattractive to those with chronic illness. Or, the employer raises co-payments for drugs needed by the chronically ill, also rendering the plan unattractive and perhaps nudging high-cost workers to examine other options.

At the same time, the employer offers to buy the targeted worker a high-benefit “platinum” plan in the marketplaces. The plan could cost $6,000 or more a year for an individual. But that’s still far less than the $300,000 a year that, say, a hemophilia patient might cost the company.

There are provisions to prevent this kind of gaming the system using Medicare but not in the ACA. While there is no indication that many companies have tried to do this yet, that shouldn’t be surprising. I suspect a lot of companies and individuals wanted to see how well things work in the first year or two before deciding whether to try using the exchanges.

Over the next few years I think the Rube Goldberg structure of the law is really going to show its flaws. Even if companies don’t try to aggressively exploit this particular scheme, it is easy to picture a scenario where companies with sick workforces tend to stop offering coverage moving their employees into the exchanges while companies with healthy employees continue providing coverage. There are a lot of moving parts that don’t fit perfectly together.

It might be possible to make this complex system work relatively well if we aggressively patch each issue as soon as it arises but that would take serious political will and a very responsive Congress, neither of which we have.

Photo by Sonny Abesamis under Creative Commons license

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at