Virginia Law Review








This Article argues that federal health care reform may induce employers to redesign their health plans so that low-risk employees retain employer-sponsored insurance (“ESI”) but high-risk employees opt out of ESI in favor of insurance available on the individual market. It shows that such a strategy would shift health care expenses for high-risk employees from employers and their low-risk employees to the public at large. Not only would this undermine the spirit of health care reform, but it would jeopardize the sustainability of the insurance exchanges that are designed to organize individual insurance markets starting in 2014. In particular, it would expose these exchanges to adverse selection caused by the entrance of a disproportionately high-risk segment of the population into the insured pool. This, in turn, would increase the cost to the federal government of subsidizing coverage for qualified individuals and exempt more people from complying with the so-called individual mandate, thus producing further adverse selection. Because this type of targeted employer dumping has been overlooked in public policy debates, lawmakers have failed to act on various straight-forward responses to the underlying problem. The Article concludes by offering several such solutions, which could be implemented either by legislatures or, in some cases, by federal regulators. A response to this Article by David Hyman, entitled PPACA in Theory and Practice: The Perils of Parallelism, is available here: health care reform, employer health insurance, health insurance markets


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