Opt-Out

ACU Frank

Do any of you deal with group insurance plans that DO NOT allow participants to opt-out for any reason? I'm interested in why people would be required to participate. I understand that some plans may be 100% employer paid, but even in those, forced participation still seems a bit much.

sonny

Currently we do, but are looking to change. We pay 100% of the premium on all full time ee's and the person in this position prior interpreted 100% participation to mean that all must participate. In talking to our agent, she says 100% ELIGIBLE * must participate. We have talked about allowing folks to opt out with proof of other insurance. .Most of our requests come from ee's who have Tricare, Medicare or good coverage with a spouse. We would like to offer a small incentive, but when I researched this before, apparently there are some issues .particularly related to Tricare and medicare.

I hope some others chime in here as to what they are doing and roadblocks around tri-care and medicare.

* eligible would be defined as no other coverage, hence paticipation would still be 100%.

Dutch2

Before we went to a self insurance plan our former full coverage provider had it as part of our contract that all eligible employees must participate in the plan. I am sure this was simply a way for them to be paid the most they could be in monthly premiums.
Since we went to self insurance, we no longer require every employee to be covered by our plan. We probably have less than a handfull that are not on our plan, due to coverage on their spouses plan or such. We have always paid 100% of the employee cost of coverage (and about 50% of the dependent care cost).

cnghr

I ran into this recently when my husband took a new job. He was going to opt out because he's already covered under my plan, but he was told that since his employer pays 100%, he HAD to go on the plan. We asked the benefits person at his employer about why he had to do it, and she didn't really know so she contacted their insurance broker. Even then, the best answer anybody could give us was "that's the way the plan is set up". I even tried calling the benefits person myself because I thought maybe that, since I have worked with insurance plans for quite a few years, she could explain it to me better than she could my husband, but it still seemed that the only answer she could come up with was "that's just the way it works".

Forced participation doesn't make a lot of sense to me; the employer still has to pay the premiums for that employee, and if our insurance rates are comparable to what most companies of similar size are paying, they could save probably $6,000 per year per employee if they allowed them to opt out of the coverage.

plynnl

We do have an opt out clause with our insurance. We just have to sign a waiver that we have coverage through spouse or individual insurance.

sonny

Do you offer anything to those who opt out? Do you require them to provide proof of the other insurance? Anyone know about issues with Tricare?

NaeNae55

Some employers have to worry about negative selection. That is, the only people who take the insurance are the high risk users. This puts the costs way up. If you make your plan where everyone is covered, the risk pool is spread out. This brings individual rates down, though it does not always guarantee saving the employer money.

Good luck!

Nae

ACU Frank

Your insurance company can provide you with a rate for 100% participation, and one for xx%. As long as xx% is higher than, say, 70-80%, the rate difference is generally insignificant.

Cheryl S SPHR

We are self-funded and allow employees to opt-out. We do not pay them anything if they choose to do so. My concern about allowing folks to opt-out has to do with adverse selection in our group -- those that are healthy and can get coverage elsewhere may do so and the ones you have left in your group are those that others won't cover. So far, though, it hasn't been a problem. I think not paying them to opt-out helps the adverse selection issue.

plynnl

We do not offer anything for employees who opt out of insurance. We figure health insurance is a company benefit and not required ,so if an employee choses not to participate, it is their option. Those who have opted out have insurance through their spouses but we do not require verification.

davids

We require all full-time employees to participate and we don't pay the full premium (we pay 98.8% of the premium). By requiring all eligible employees to participate we are receiving a better rate. If you allow employees to opt-out, you may end up with adverse selection. That is, only the employees with medical needs will take insurance. That leads to a small pool of high activity users on your insurance plan. For example, last year we had a $450,000 claim and two $150,000 claims. The risk, however, was spread among our pool of 400 employees. If we allowed employees to opt-out, and half the employees did, the risk for those large claims would have been spread among a pool of 200 employees. We would have received a rate increase significantly higher than we did.