How is my employer affected if I have expensive claims on my group health insurance?

Question

Suppose, for the sake of discussion, that I work at ACME, Corp, a USA company. As part of my compensation, ACME makes me a member of their group health insurance through Aetna, a USA health insurance company (or any other company).

Suppose further that I am diagnosed with hypothetical cancer. This hypothetical cancer requires very expensive treatment ( > $100,000 over the course of a year ), but I am able to continue working while receiving treatment.

I would like to know how this affects ACME. Is this going to be a cost to ACME somehow? Will their premiums rise because I am a member requiring expensive treatment? Will Aetna try to have me removed from the plan somehow so they don't have to pay?

Also, suppose that ACME goes out of business and I need a new job. Will my cancer affect a future employer who hires me? Should I keep my cancer a secret from potential employers for money reasons?

Answer 1

Many big companies self insure. They pay the insurance company to manage the claims, and to have access to their network of doctors, hospitals, specialists, and pharmacies; but cover the costs on a shared basis with the employees. Medium sized companies use one of the standard group policies. Small companies either have expensive policies because they are a small group, or they have to join with other small companies through an association to create a larger group.

The bigger the group the less impact each individual person has on the group cost. The insurance companies reprice their policies each year based on the expected demographics of the groups, the negotiated rates with the network of providers, the required level of coverage, and the actual usage of the group from the previo year.. If the insurance company does a poor job of estimating the performance of the group, it hits their profits; which will cause them to raise their rates the next year which can impact the number of companies that use them.

Some provisions of the new health care laws in the US govern portability of insurance regarding preexisting conditions, minimum coverage levels, and the elimination of many lifetime cap. Prior to these changes the switching of employers while very sick could have a devastating impact on the finances of the family. The lifetime cap could make it hard to cover the person if they had very expensive illnesses.

If the illness doesn't impact your ability to work, there is no need to discuss it during the interview process. It won't need to be discussed except while coordinating care during the transition. There is one big issue though. If the old company uses Aetna, and the new company doesn't then you might have to switch doctors, or hospitals; or go out-of-network at a potentially even bigger cost to you.

Answer 2

Your employers insurance premiums will definitely go up if there are a lot of claims when it is time for them to renew their policy. It is also possible that if this happens the employer will pass along some of the additional cost to employees.

The insurance company will not try to have you removed, it doesn't work that way with group policies. They just jack up the price as mentioned previously.

If you take a new job your cancer will affect the future employer in the same way. As to whether you should keep it a secret, I don't think it is something you have to disclose unless it affects your ability to perform your job, even then it may be protected under the Americans with Disabilities Act. It is true that some employers could exhibit some bias because of this, especially a small company that is likely to have a small group that is more likely to see price hikes because of a single employee making expensive claims.

Bottom line: I wouldn't lie about it to a future employer, but I wouldn't volunteer that information either unless it is material to your job performance.

Answer 3

There are a number of important points raised in your question. This question is very US-centric, as is my answer. Others have already raised the issue of employers who 'self-insure', so this answer does not address that case.

First and foremost, it is illegal for an employer (or potential employer) to ask about your medical situation and it would be highly inappropriate for you to disclose it. This is no different from being asked, or disclosing, your age (or gender preference), and could greatly affect the hiring decision (even though it should not), so do not disclose it.

Secondly, employer-provided 'group' healthcare insurance cannot be denied to anyone in the 'group', so - to use your example - Aetna cannot try to have you removed from the insurance plan, nor can they take into account any pre-existing condition (As an aside, the Affordable Care Act (ACA) attempts to extend this approach to 'individual' insurance).

Thirdly, whether and by how much an employer is affected by an individual employee's specific claims depends on numerous factors but one key factor is the size of the company. A small company (under 100 employees as defined by the ACA) is legally required to be treated differently by an insurance company compared to a larger company. Essentially, there are two ways for an insurance company to set rates; 'community' based or 'experience' based. Small companies must be evaluated using 'community' rating; 'large' companies (over 100) must be evaluated using 'experience' rating.

'Community' based means the rate is set based on the claims history of the 'community', which means, Age, Family Size, Geographic Area, and Tobacco Use. 'Experience' based means the rate is set based on the actual claims history of the actual employee base of the company itself. The reason for this is - once a company attains a certain number of employees, it makes (relative) sense to look at the actual claims history of the company when setting rates. But for a small company, using 'actual' claims history could be so highly skewed by one individual employee's claim history that it is considered unfair practice, and the rates for small companies is therefore required to be set according to the 'community'. Specifically in your case, if you joined a company with (eg) 75 employees, you (your claim activity) would not affect their rates much; if you joined a company with 100,000 employees, you would not affect their rates much either (statistically insignificant); but if you joined a company with 120 employees, you could affect their rates quite substantially.

Answer 4

There is the way it should be under law, and there is the way it is. I work for a relatively small company and one of the employees wives who is on our plan was diagnosed with cancer. Her treatment plan is quite expensive. The owner found out from the insurance company due to her treatments he will not be receiving his yearly refund check from the insurance company (ACA requires insurance companies to spend 80% of premiums paid on that group plan to be used for healthcare, or a refund is due to the employer). He was also told his rates would be going up significantly next year. It is crazy to think that some business owners would not choose to act on that information. I worked for a company for over 5 years in sales I have been a top producer, and a member of the "President's Club". Myself along with another woman I work with were both terminated without any explanation and management refused to provide a reason. The one thing we have in common is disk problems in our backs that caused us to have to get spinal epidural treatments 3-4 times per year under our insurance. You figure it out.

Answer 5

I don't think so. There is a provision in ObamaCare called "community rating" that applies starting in 2014. Insurance companies must place individual and small group plans into a pool of people from the same geographical region. The same plan must cost the same for all small businesses from the same region. So having employees who have high costs will not significantly affect the company's cost; it will get factored into the cost for all people in the area; but the effect gets averaged out over all businesses and individuals who have plans.