Is it legal to move an employee from my group health plan to the a guaranteed issue individual plan?
This is a big question with a lot of money on the line for employers and insurers.
During open enrollment (October 1, 2013–March 31, 2014), anyone could have purchased a health plan either on or off of the exchange. Keep in mind that if an employee has access to a group health plan, it might disqualify them from receiving tax credits on the exchange, but not on the actual health plan.
A University of Minnesota’s law professor had a paper published back in 2010 that predicted this exact situation. If you read the paper, you will see it was predicted that employers would redesign their health plans to intentionally try to move high-utilization employees off of the group plan. I, on the other hand, would disagree that a plan would be designed with that being the primary intention.
This issue opens up a very interesting discussion for large self-funded groups. This issue would not impact small companies that have fully-insured premiums. On large self-funded plans, the employers pay the initial claims up to a certain point. That certain point is called “stop loss” insurance. It is exactly what it sounds like, stop the losses.
Under these arrangements, the reinsurance contract to initiate a term is called lasers. Lasers (excluding individuals or setting a unique, higher pooling level for individuals who are expected to have large claims, increase customer liability) are optional, depending on risk tolerance .
An example would be a group that has a stop loss limit of $125,000 per person on the plan. This means the company is going to pay the 1st $125,000. There is a high claimant that is projected to have $700,000 in claims. The reinsurance contract has the ability to laser and moves the $125,000 stop loss to $400,000. Now, the employer is responsible for that $400,000.
At this point, options may be entertained on controlling cost. With the new Affordable Care Act, an option that might be discussed is moving the high claimant to an Individual health policy during open enrollment.
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