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

posted at 8:31 pm on February 18, 2013 by Erika Johnsen

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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Single Payer is the Goal.

Bmore on February 18, 2013 at 8:32 PM

Been paying 100% for several year..

And you know…
The costs are much lower paying out-of-pocket…

Electrongod on February 18, 2013 at 8:36 PM

5 minutes, could have made one heck of a run.

Bmore on February 18, 2013 at 8:37 PM

Single Payer is the Goal.

Bmore on February 18, 2013 at 8:32 PM

Never a doubt.

KCB on February 18, 2013 at 8:37 PM

Bmore on February 18, 2013 at 8:32 PM

You’re an insightful and wise man, Bmore. The progressives are still in love with the failed NHS model, despite the fact that a nationwide scandal has engulfed the program due to the unnecessary deaths of thousands of patients in NHS hospitals across Britain. Primarily the elderly, disabled, and small children, however those claimed through abuse, neglect and misuse of the Liverpool Pathway have included all ages and social status.

thatsafactjack on February 18, 2013 at 8:38 PM

Thoughts of the Titanic come to mind, with Captain Fail at the helm.

Polish Rifle on February 18, 2013 at 8:38 PM

In other words, its all going according to plan.

ctmom on February 18, 2013 at 8:38 PM

Pretty simple way to keep this from happening: Send an armed Domestic Security Force unit to each self-insuring company, drag away a few of the higher ranking employees, and let the rest know that Utopia and a Dog Eating preznit will NOT be denied.

Bishop on February 18, 2013 at 8:39 PM

I’m waiting for Bohenor and the GOP establishment to cave yet again…

Myron Falwell on February 18, 2013 at 8:41 PM

“We have to pass the bill so that you can find out what is in it”

– Nancy Pelosi, 2010

Robert_Paulson on February 18, 2013 at 8:42 PM

Pretty simple way to keep this from happening: Send an armed Domestic Security Force unit to each self-insuring company, drag away a few of the higher ranking employees, and let the rest know that Utopia and a Dog Eating preznit will NOT be denied.

Bishop on February 18, 2013 at 8:39 PM

Charge them for Obamatax evasion, and such a scenario is totally plausible.

Myron Falwell on February 18, 2013 at 8:42 PM

Since We The People keep finding ways to circumvent the One and his omnipotent ideas, I suspect we’re in for some price controls with a slathering of criminal penalties for not paying your fair share.

BobMbx on February 18, 2013 at 8:44 PM

I work for a university that has a self-insurance program. The premiums are significantly less than what others pay for, say, an HMO. Under the plan, I pay 20% of all my medical expenses, but I very rarely get sick, so maybe I’ll spend about $200 a year (after the premiums). But, at least I know how much things cost (office visits, labs, etc.), unlike my family members in HMO’s who have no idea how much anything costs.

sydneyjane on February 18, 2013 at 8:47 PM

Who could’ve seen this coming?

Anyone who doesn’t use their ass for a brain.

GarandFan on February 18, 2013 at 8:50 PM

sydneyjane on February 18, 2013 at 8:47 PM

I like this idea, but could it be implemented say for each community?

Having access to some kind of ‘self insure’ program that is reasonable etc.

I think most could afford say up to 150 a month, with a once a year say 300 payment…

Scrumpy on February 18, 2013 at 8:53 PM

Single Payer is the Goal.

Bmore on February 18, 2013 at 8:32 PM

Exactly, Obamacare is supposed to fail.

jnelchef on February 18, 2013 at 8:56 PM

The Republicans missed the boat on this one back in 2005 when they chose to take on Social Security. The obvious solution would be to remove health insurance from the employers hands and put it in the individual’s hands. Not only would the costs been significantly lower, if an individual were to buy his own insurance, anyone could buy it so, if you’re unemployed you could have it, if you’re an illegal alien you could have it. No, not my republicans, they took on Social Security, knowing the Democrats would never let it go through. Thanks Republicans!

bflat879 on February 18, 2013 at 9:00 PM

In other words, its all going according to plan.

Bingo!!! In fact, it’s going better than he hoped 10 years ago

http://www.youtube.com/watch?v=fpAyan1fXCE&sns=em

drivingtheview on February 18, 2013 at 9:01 PM

For those who know what they’re looking it, it’s an incredibly damning indictment of Obamacare and the Gov’t Enforced Insurance Cartel system it’s replacing that private businesses are willing to enter a foreign industry and insure employees with their own money to avoid the red tape monster, rather than leaving such financial instruments to financial companies.

It would be like if businesses opened a mortgage office in human resources to lend their employees money, or started a farm to stock their cafeteria. It’s insane.

HitNRun on February 18, 2013 at 9:01 PM

Self-insure, pay the penalty,religious health care sharing, etc–necessity is the mother of invention and she is alive and doing well………

hillsoftx on February 18, 2013 at 9:07 PM

Who could’ve seen this coming?

Anyone who doesn’t use their ass for a brain.

GarandFan on February 18, 2013 at 8:50 PM

And to think that I thought it was once unfair to call Socialists “buttheads,” and yet, it couldn’t be more accurate.

Myron Falwell on February 18, 2013 at 9:08 PM

Since We The People keep finding ways to circumvent the One and his omnipotent ideas, I suspect we’re in for some price controls with a slathering of criminal penalties for not paying your fair share.

BobMbx on February 18, 2013 at 8:44 PM

The government should just build “Obama reeducation” camps and get it over with.
Be much cheaper in the long run.

redguy on February 18, 2013 at 9:08 PM

Has anyone heard of an offshore health insurance company offering to write policies here? Would they fall under Obamacare?

BobMbx on February 18, 2013 at 9:09 PM

Pretty simple way to keep this from happening: Send an armed Domestic Security Force unit to each self-insuring company, drag away a few of the higher ranking employees, and let the rest know that Utopia and a Dog Eating preznit will NOT be denied.

Bishop on February 18, 2013 at 8:39 PM

You are giving too much power for a bunch of parasites who have hard time getting out of bed… The moment these fools decide to go violent we will end it up very quickly on our own and without the need for help from the military that votes 70% Republican or the military officers staff that votes 90% Republican… When it comes to winning a violent war the odds are 100% on our side…

mnjg on February 18, 2013 at 9:11 PM

There is a monster loose and it’s name is OBAMA!

Scrumpy on February 18, 2013 at 9:14 PM

Single Payer is the Goal.

Bmore on February 18, 2013 at 8:32 PM

True… However if Obamacare is so unpopular and it took them 2 years to pass it and did not pass with a single Republican vote imagine the odds of them succeeding in single payer program… The odds are very much against them… They can try it again in 2030…

mnjg on February 18, 2013 at 9:14 PM

About 20 years ago the president of my company decided to cancel all his auto insurance (except liability) and be self-insured. The next week someone stole his new Cadillac at O’Hare.

bw222 on February 18, 2013 at 9:17 PM

mnjg on February 18, 2013 at 9:11 PM

I wish I could share that same level of optimism. I really could. But the Socialists have conquered too much already. At best, we might stand an imperceptible chance of winning.

Myron Falwell on February 18, 2013 at 9:19 PM

The Republicans missed the boat on this one back in 2005 when they chose to take on Social Security. The obvious solution would be to remove health insurance from the employers hands and put it in the individual’s hands.

bflat879 on February 18, 2013 at 9:00 PM

I think the Dems would have fought this (successfully) as well. They will fight anything that puts choice in the individual’s hands. And they would have successfully scared the public into believing the personal choice would cost them a bundle. Just sayin’.

DaveDief on February 18, 2013 at 9:19 PM

About 20 years ago the president of my company decided to cancel all his auto insurance (except liability) and be self-insured. The next week someone stole his new Cadillac at O’Hare.

bw222 on February 18, 2013 at 9:17 PM

That was his problem. He lived in Chicago.

Myron Falwell on February 18, 2013 at 9:20 PM

I wish I could share that same level of optimism. I really could. But the Socialists have conquered too much already. At best, we might stand an imperceptible chance of winning.

Myron Falwell on February 18, 2013 at 9:19 PM

I was responding to a poster who said that the socialists are going to use violent… I told him that the odds of winning a violent conflict against the socialists are 100% on our side… Try to argue otherwise…

mnjg on February 18, 2013 at 9:30 PM

Aren’t we due for some hack to let us know how Jug Ears is the smartest guy in the room, about now.

Jeebus… this guy is lucky he figured out how to control slobber’n & drool’n

roflmmfao

donabernathy on February 18, 2013 at 9:31 PM

I like this idea, but could it be implemented say for each community?
Scrumpy on February 18, 2013 at 8:53 PM

I don’t know enough about how insurance works to know if it could work for other communities. I do know that a lot of universities like mine have self-insurance programs. Funny thing is, while I like my program, my sister thinks her HMO is better because all she has to pay is a small co-pay for each visit (she works for the feds so we pay her premium!). But, I’ve got something she doesn’t have – choice. I can choose my own doctor, I don’t have to get a referral. I’m so worried I’m going to somehow lose that with Obamacare.

sydneyjane on February 18, 2013 at 9:34 PM

Why not replace the 15 bureaucrats on the panel handing out life & death sentences with drones?
Oh, I’m sure the Axelrod team has already thought of that.

Belle on February 18, 2013 at 9:35 PM

Bmore on February 18, 2013 at 9:25 PM

Ummmmm that’s a white guy?!

Scrumpy on February 18, 2013 at 9:36 PM

sydneyjane on February 18, 2013 at 9:34 PM

From what I have been reading the possibility is great.

Scrumpy on February 18, 2013 at 9:38 PM

I don’t know enough about how insurance works to know if it could work for other communities. I do know that a lot of universities like mine have self-insurance programs. Funny thing is, while I like my program, my sister thinks her HMO is better because all she has to pay is a small co-pay for each visit (she works for the feds so we pay her premium!). But, I’ve got something she doesn’t have – choice. I can choose my own doctor, I don’t have to get a referral. I’m so worried I’m going to somehow lose that with Obamacare.

sydneyjane on February 18, 2013 at 9:34 PM

100% confirmation that you will lose your choice option when Obamatax is fully implemented. Bank on it!

jjnco73 on February 18, 2013 at 9:41 PM

It cost too much to put gas in my car in order to drive to CVS for some Advil.

racquetballer on February 18, 2013 at 9:41 PM

True… However if Obamacare is so unpopular and it took them 2 years to pass it and did not pass with a single Republican vote imagine the odds of them succeeding in single payer program… The odds are very much against them… They can try it again in 2030…
mnjg on February 18, 2013 at 9:14 PM

Not really. All it will take is for one major national insurer to go bankrupt and the rest fall like dominoes. Then our noble federal government will swoop in to pick up the pieces. Just like government motors, just like the airport security takeover. No crisis shall go to waste and that’s what the goal is here. Create a crisis by decimating the private insurance market and, by golly, the govt. will have no choice but to offer single payer to save everyone. The idiot media will be oh so helpful, too, by creating mass hysteria and panic.

The wheels are already in motion. Just a matter of how long it will take.

NoLeftTurn on February 18, 2013 at 9:42 PM

Ummmmm that’s a white guy?!

Scrumpy on February 18, 2013 at 9:36 PM

Half white. Besides I was all out of brown eggs. ; )

Bmore on February 18, 2013 at 9:44 PM

Not really. All it will take is for one major national insurer to go bankrupt and the rest fall like dominoes. Then our noble federal government will swoop in to pick up the pieces. Just like government motors, just like the airport security takeover. No crisis shall go to waste and that’s what the goal is here. Create a crisis by decimating the private insurance market and, by golly, the govt. will have no choice but to offer single payer to save everyone. The idiot media will be oh so helpful, too, by creating mass hysteria and panic.

The wheels are already in motion. Just a matter of how long it will take.

NoLeftTurn on February 18, 2013 at 9:42 PM

It is not going to happen anytime soon not and as I said they can try it in 2030 at the earliest… So what of a major insurance company goes bankrupt? Like any other industry companies succeed and fail but the industry will go on…

mnjg on February 18, 2013 at 9:52 PM

Off topic, but its about the chosen one: On Drudge:

“POLITICO: WHITE HOUSE REPORTERS REBEL… GO ON RECORD TO CALL ACCESS ‘DISGRACE’… DEVELOPING…”

No way will the left biased, poor journalistic press say something negative about the King. I’ll believe it when I see it.

Belle on February 18, 2013 at 9:54 PM

I doubt Obama cares about what’s happening in the real world. As long as he and his liberal friends got theirs, the world can go to hell.

racquetballer on February 18, 2013 at 10:08 PM

You’re an insightful and wise man, Bmore. The progressives are still in love with the failed NHS model, despite the fact that a nationwide scandal has engulfed the program due to the unnecessary deaths of thousands of patients in NHS hospitals across Britain. Primarily the elderly, disabled, and small children, however those claimed through abuse, neglect and misuse of the Liverpool Pathway have included all ages and social status.

thatsafactjack on February 18, 2013 at 8:38 PM

Yep; the democratics’ model is similar; as envisioned by the ghoulish Ezekiel Emanuel, it is based on the value of a person to the community, ie the collective. Old people will be cut off from medical care, but so will the very young. Their very blase attitude about abortion should be a clue to that.

Your baby is sick, -just let it die, -you can just pop out another one.

slickwillie2001 on February 18, 2013 at 10:20 PM

So now that we’re paying the taxes on Obamacare, no one is holding out hope that the Supremes will strike it down? Aren’t there a few cases pending on this topic?

SouthernGent on February 18, 2013 at 11:00 PM

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

Sometimes I almost think Obummer is actually some kind of Conservative Reaganite mole who has infiltrated the Marxist elite. Also, his crew has done more for the American arms industry and gotten more guns into more Americans’ hands than anyone previously. They’ve also helped to further weaken many of the Democratic urban bastions (Detroit’s a prime example), and have instilled an economic climate in which union jobs are disappearing at a fast pace.

Probably not, but it’s an intriguing notion…

Dr. ZhivBlago on February 18, 2013 at 11:14 PM

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.

Don’t be surprised if the government moves to make these approaches illegal in the next few years.

tom on February 19, 2013 at 2:11 AM

For another angle on the perverse incentives for healthy people to dump health insurance coverage, see this tool, where you can do the math for yourself!

ironman on February 19, 2013 at 6:56 AM

Health care will never work until we veer into a cash based system. One where the price of procedures is clearly marked and does not change from a cash payer, to insurance carrier…. forcing both hospitals and insurance providers to be competitive.

Socmodfiscon on February 19, 2013 at 6:56 AM

Single Payer is the Goal.

Bmore on February 18, 2013 at 8:32 PM

^This

JoseQuinones on February 19, 2013 at 8:38 AM

You know, there is actually a business opportunity in all this for an entrepreneur with a strong stomach for risk: Open little quick clinics in shopping malls for the basic things like injections, refills of prescriptions, basic trauma emergency care like stitches, X-rays, CAT scans, etc. All the little stuff you don’t need a hospital for. Staff it with one MD and about three or four nurse practicioners. Guarantee people prices from an à la carte menu. Give a 30-minute or less guarantee. As Obamacare really kicks in and throughput in traditional medical establishment slows to a crawl, see how many people will be willing to pay out of pocket for a faster option.

This is already the model in
– Optometry
– Plastic surgery
– Dentistry
– Botox clinics
– Testing labs
– Tax returns
– Dry cleaning

Just as an aside, here in Puerto Rico we have enjoyed the blessings of NHS-style nationalized healthcare since the 1940′s. Not coincidentally, there are all kinds of little private clinics where you can pay out of pocket for medical tests, etc. It does work very well and the service is usually splendid.

JoseQuinones on February 19, 2013 at 8:44 AM

One angle that seems not to have been addressed (unless I have missed a similar comment) is that the next logical effect is for self insuring employers to carefully vet the health of prospective employees so that the effect will be that the chronically ill, (e.g. diabetics), overweight, smokers or people with a host of poor health indicators will not be able to get a job. This will be a double whammy to health insurers who will have to insure a disproportionate amount of people who are both unhealthy and on welfare.

deltawingman on February 19, 2013 at 12:41 PM