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Don’t Like Obamacare? Exempt Yourself

Could Obamacare self-destruct? We’ve previously written about the possibility that companies would respond to the Affordable Care Act by self-insuring, using a form of coverage called stop-loss insurance to take direct responsibility for their employees’ health care costs. This scheme lets companies escape the new taxes that Obamacare imposes, as well as giving them more flexibility in the benefits they offer to their employees.

Well, it appears that these troubling possibilities are in fact coming to pass, according to Kaiser Health News:

At BSI Strategic Consulting, a Fresno, Calif., firm that helps small companies self-insure, “our business has more than doubled in the last six months,” says CEO Lawrence Thompson. “There’s a lot more interest in self-funding than I’ve seen in the last 32 years.”

At insurance giant Cigna, self-coverage for small employers grew by a fifth last year, says Julie McCarter, vice president of product development for Cigna Select, which sells medical stop-loss coverage and claims processing.

Self-insurance is a rational move for companies who employ mostly younger, healthier workers. One company quoted in the article says its self-insurance coverage is 45 percent cheaper than the cost of normal plans.

But widespread self-insurance is likely to destabilize the exchanges Obamacare is setting up, spreading more chaos throughout the whole system. Companies full of younger workers will self-insure. Companies with older and sicker workers who are denied stop-loss insurance will have to sign up for the plans offered in the exchanges. As a result, these plans’ premiums will get more expensive—by as much as 25 percent, according to an Urban Institute expert.

Last month we reported on how Obamacare incentivizes non-insurance by levying a non-compliance tax that is much smaller than average premiums. The self-insurance incentive is a second major destablizing loophole in the ACA. Republicans who want to “repeal and replace” might not have to go to the trouble. While it’s unlikely they will be able to pass a bill to defund Obamacare for political reasons, the new health care law might just repeal itself.

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