NCPA - National Center for Policy Analysis

"Lasering" Used to Save on Employer Health Plans

September 30, 2003

In the game of hot potato that health insurance has become, employers and insurers keep trying to pass rising health costs to each other. Now, insurers are using a tactic called "lasering," which shifts the costs of the sickest workers back into the lap of employers.

  • Typically, self-insured employers -- a common practice under which a company pays most of its employee medical bills -- contract with stop-loss, or reinsurance, carriers to pay catastrophic claims.
  • This protects an employer from being hit with a single medical bill that could wreak havoc on its health plan.
  • But now, as employers seek to renew their stop-loss coverage or obtain new contracts, reinsurance companies are lasering, or carving out, severely ill employees from coverage.
  • And employees don't realize when they have been carved out of coverage, since employers are required by law to offer benefits to all eligible workers.
  • An employee cannot be charged a larger premium because lasering has occurred.

While the Americans With Disabilities Act prohibits employers from firing employees or refusing coverage due to illness, employers have substantial financial incentive to get rid of people who cost a lot of money, says Lou Maltby, president of the National Work Rights Institute.

The impact of lasering is greatest on small companies, which can't spread the additional cost over thousands of employees as can large self-insured companies. To save money, some big companies elect to go without stop-loss coverage and pay catastrophic claims out-of-pocket.

Source: Christopher Windham, "More Companies That Self-Insure Get Stuck With Huge Medical Bills: Some Insurers 'Laser' Sickest Workers," Wall Street Journal, September 30, 2003.

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http://online.wsj.com/article/0,,SB106486463561894000,00.html

 

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