Why is the Government warning employers against providing financial incentives to buy non employer health coverage? The implementation of the Affordable Care Act (ACA) has effectively revolutionized the U.S. healthcare insurance system. Now there is no longer an emphasis primarily on employers sponsoring the bulk of workers’ health insurance plans. In fact, there are now online exchanges where employees can shop for and purchase their own medical coverage instead of paying into their existing employment based plan. Some employers have welcomed this shift in burdens. However, some employers may be taking it too far, and the federal government has gone on record warning employers against providing financial payments to their high-cost employees as incentive for them to leave their employer’s medical plan in favor of purchasing their own individual market policy.
Non Employer Health Coverage, Rising Costs and Employer Incentive
From the employer standpoint, the costs associated with providing employee healthcare have risen so much since the ACA’s implementation that they are looking for any way to lessen their financial burdens. Some employers are finding it cheaper to pay their high-cost workers in exchange for the worker agreeing to exit their existing benefit plans, so that the employer does not have to continue making contribution payments on that employee’s behalf.
A November 14, 2014 memo released by the U.S. Department of Labor, Treasury, and Health and Human Services (the “Departments”) stated that providing payments in exchange for employees purchasing individual market policies is considered unlawful discrimination against employees on the basis of their health status. In fact, according to a May Kaiser Health news report, health insurance consultants and brokers have been advising employers to shift workers with expensive health conditions into individual market policies as a cost-cutting mechanism. Such practices are in direct opposition of the ACA, which requires that health insurance exchange plans accept all applicants, regardless of their existing illnesses or health conditions. This acceptance must be at prices that have been pre-established before acceptance.
The reality is that the costs associated with implementing the ACA have resulted in some companies’ health insurance liability costs increasing by over 100 percent. As a result, large, self-insured employers are looking for any way to cut costs. Employers are finding that the removal of just one high-cost employee from the group insurance plan can result in annual savings of hundreds of thousands of dollars. For some, a one-off lump sum payment to an employee is well worth the future financial benefits associated with that employee’s exit from the group policy.
Both the federal government as well as consumer advocates are concerned about this practice because it could erode the effectiveness of employer-based coverage, while creating higher costs and premiums for the entire insurance marketplace. If employees who would be better suited in employer-based plans are incentivized to switch to individual market policies, the entire marketplace would be forced to absorb the costs associated with the employee’s sickness instead of the employers, which are the one’s with the actual vested interest in the employee’s well being.
Employer payments in exchange for a worker exiting their existing employment based insurance policy is a violation of the ACA, and is considered unlawful discrimination. If an employer has propositioned you about switching to an individual market policy in exchange for payment, you should contact the Santa Rosa, Ukiah, Lake County California employment law attorneys at Beck Law P.C. today.
