By Russell Ethridge
Today’s Machining World Archives May 2007 Volume 03 Issue 05
I have a small manufacturing shop. We offer great health insurance, but it’s expensive, and the employee’s share has grown. One of my best friends was laid off from his job at a big company, but has been continuing his insurance through them by paying the premiums himself. By law, one can do this for 18 months, and he is nearing the end of that time. He asked if he could become my “employee” for the purpose of getting health insurance. He wouldn’t be our employee, but he would pay the company for the insurance premiums so it wouldn’t cost me anything. I know he needs the coverage, and our group rates are better than anything he can get, especially since his wife has had breast cancer. He says she’s at a low risk of recurrence, but big claims affect what we pay. I want to help my friend but I’m uncomfortable misrepresenting his status just so he can get insurance.
In the United States, private insurance providers decide for the most part who they want to insure, what they want to cover, and how much to charge. Insurance companies base their rates on actuarial calculations derived from the likelihood of claims arising from the risk pools they decide to insure. With employer sponsored plans, most carriers don’t require a health background questionnaire or physical exam because they rely on the law of averages to set rates. They are willing to apply the law of averages to groups of employees because they are guaranteed a pool of business that is easier to administer than individual coverage and for which the risk of non-payment of premiums is minimal. In addition, the requirement of genuine employment reduces the risk that a pool will contain a disproportionate number of less than able bodied members who might make more claims. This business model is skewed, however, when it is artificially manipulated by misrepresentations such as the one you are suggesting. In the extreme, a soft-hearted employer could put anyone “on the payroll” just for purposes of getting insurance, and the effect on all the legitimate employees might be a hike in their deductibles, co-pays, or share of the premium. Although most plans require some minimum number of employment hours to qualify for coverage, perhaps yours doesn’t, and you could avoid misrepresenting his status by simply making him legitimately “part-time.” Misrepresenting his status, however, could cost you your group coverage or hike your rates if the carrier got wind of it, and you owe it to your employees to maintain the insurance they’ve come to rely on as best you can. You’re better off helping your friend find some affordable private coverage (if there is such a thing) instead of putting your good name and your employees’ health care at risk