Another blow to ObamaCare: The increasing appeal of self-insurance

As much as President Obama may have been hoping that the magically redistributive powers meant to be deployed via ObamaCare would go off without a hitch, it’s a pretty predictable phenomenon of human nature that people are going to act in accordance with their rational self-interest — and with loopholes like these, employers are obviously going to be on the lookout for saving as much money as they can.

It’s been a fairly frequent practice for larger companies to self-insure, i.e., take on most of the financial risks of providing health benefits to their employees sans traditional insurance programs and the accompanying premiums, and instead only signing up for “stop-loss” insurance to protect themselves against the possibility of really major health-care costs (the sort that come with long-term debilitating diseases or sudden catastrophe). It’s a trend that’s been gaining some steam over the past decade or so, but certain aspects of ObamaCare mean it is becoming more worthwhile for even more and even smaller companies to consider the option for themselves — especially if they have younger, typically healthier workforces.

That means that instead of the costs of ObamaCare being [re]distributed across a wider pool, the price of premiums is going to grow larger for people who stay in the system as more and more companies consider opting out. The NYT reports:

Federal and state officials and consumer advocates have grown worried that companies with relatively young, healthy employees may opt out of the regular health insurance market to avoid the minimum coverage standards in President Obama’s sweeping law, a move that could drive up costs for workers at other companies.

Companies can avoid many standards in the new law by insuring their own employees, rather than signing up with commercial insurers, because Congress did not want to disrupt self-insurance arrangements that were seen as working well for many large employers.

“The new health care law created powerful incentives for smaller employers to self-insure,” said Deborah J. Chollet, a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.” …

Insurance regulators worry that commercial insurers — and the insurance exchanges being set up in every state to offer a range of plan options to consumers — will be left with disproportionate numbers of older, sicker people who are more expensive to insure.

That, in turn, may drive up premiums for the currently uninsured for which these upcoming exchanges are designed; which, in turn, may incentivize more people to simply pay the insurance-less penalty rather than bother taking out an actual plan. Who could’ve seen this coming?

It all comes from the regressive and unsustainable attempt of trying to mandate that the younger and/or healthier populace pay more to compensate for the older and/or less healthy — and it’s a runaway train off of which people are starting to jump whichever way they can.

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