Risk Transfer Strategy – Exchange Dumping Gains Interest


Excerpt of Article Written by Amy Monahan and Daniel Schwarcz, Associate Professors of Law – University of Minnesota Law School

“Exchange dumping is a risk transfer mechanism whereby plan sponsors may induce high-risk plan participants to opt out of employer-sponsored coverage in favor of insurance available on the individual market. ”

“The risk of employer dumping of high-risk employees is hardly exotic. In fact, dumping of high-risk policyholders is merely a subset of the larger insurer practice of risk classification.” Do lasers come to mind?

“If properly designed, such an employer dumping strategy can promote the interests of both employers and employees by shifting health care expenses on to the public at large. ”

“The ACA leaves self-insured employer plans virtually unregulated allowing employers a tremendous amount of freedom in designing the terms of their plans. Such employers are consequently free to design plans that appeal to relatively young and healthy employees but are unattractive to high-risk employees. Strategies include exclusion from coverage of certain high-cost conditions such as AIDS, diabetes and hemophilia. Neither ACA nor other existing sources of law substantially restrict the ability of self-insured plans to engage in indirect risk classification through design of plan benefits. ”

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