Thanks, Obamacare: Get Ready for "Targeted Dumping" of Coverage

Posted: Dec 01, 2011 11:40 AM

Any post about a newly-discovered Obamacare flaw can only start one way, right?

Right again, Nancy.  This week Americans are "finding out" about another serious problem lurking within the president's monstrosity of a healthcare law:

Minnesota Public Radio reports, “A loophole in the federal health care overhaul would allow many employers to game the system by dumping their sicker employees [into] public health insurance exchanges, according to two University of Minnesota law professors.” Such “targeted dumping” of sicker employees would cause Obamacare’s taxpayer-subsidized exchanges to cost more — potentially far more — than the Congressional Budget Office (CBO) has projected. 

“[T]here is a substantial prospect that ACA [Obamacare] will lead some, and perhaps many, employers to implement a targeted dumping strategy designed to induce low-risk employees to retain ESI [employer-sponsored insurance] but incentivize high-risk employees to voluntarily opt out of ESI and instead purchase insurance through the exchanges that ACA establishes to organize individual insurance markets. Although ACA and other federal laws prohibit employers from excluding high-risk employees from ESI, these laws do little to prevent employers from designing their plans and benefits to incentivize high-risk employees to voluntarily seek coverage elsewhere. If successful, such a targeted dumping strategy would allow employers and low-risk employees to avoid the costs associated with providing coverage to high-risk employees….”  The authors note that employers who did this “would avoid any financial penalties under the so-called individual and employer ‘mandates.’”

The CBO has already badly misjudged the number of employees who would lose their employer-sponsored insurance under Obamacare. The CBO projected that, from 2010 to 2011, a net of 6 million Americans would gain employer-sponsored insurance in the wake of Obamacare’s passage (see table 4). But Gallup has found that, since President Obama signed Obamacare into law in March 2010, 4.5 million Americans have lost their employer-sponsored insurance. In other words, the CBO’s estimate is off by about 10 million people already.

The result of all of this?  More high-risk consumers will "voluntarily" slide off of employer-based insurance plans, into government-funded exchanges.  One of the single biggest price tags of Obamacare is its premium subsidies, which will shoot through the roof under this scheme.  As Jeffrey Anderson notes in his post, the CBO has already severely underestimated how many Americans will require subsidies under Obamacare.  They also grossly underestimated how much the overall law would cost.  In truth, it will increase deficits and debt, and bend the national health spending curve up -- both direct violations of Obama pledges.  The higher number of sicker Americans who will flood  into the exchanges because of "targeted dumping" will drastically increase the cost of implementing the law, inflate average healthcare premiums, or both.  Thanks, Obamacare!

This revelation is not the first eye-poppingly terrible "gift" we've discovered within Obamacare's 2,700 pages.  In July, we wrote about a loophole that will "inadvertently" render countless middle class families unable to procure affordable insurance plans.  We also found out that citizens who live in states that choose not to establish voluntary healthcare exchanges may not be eligible to receive federal subsidies.  Oops.  And that doesn't even begin to address the major elements of the law that have already been repealed and abandoned, like the business-crushing 1099 tax provisions and the pack of lies known as the "CLASS Act" (which a House panel voted to repeal just today).

The president's signature "achievement" is a sloppy, unafforable, counter-productive, and enduringly unpopular beast.  This steady drip of horror stories simply accentuates that reality.  In order to craft and implement better healthcare policy, we must repeal the current law in its entirety.  In order to do that, we must defeat its staunchest guardian: The President of the United States.

UPDATE - Read this.  They're getting desperate.