"In theory there is no difference between theory and practice. In practice there is."
PARALLEL pathways are pervasive. Blood flows from the heart to the brain through three separate arteries; in the event of a blockage in one artery, blood is routed through the other two. We have two kidneys but need only one. If I want to drive from Champaign to Charlottesville, I can go by way of I-70 or I-80, or I can explore the blue highways. If I want to get from Champaign to Chicago, I can fly, take the bus, drive, or take the train. If I drive to Chicago and get caught in traffic on the Dan Ryan expressway, the side streets are always an option. And so on.
Parallel pathways can operate simultaneously or non-simultaneously. Simultaneous pathways are generally preferable since they provide an increased margin of safety from real-time redundancy.2 Both kidneys work continuously; they do not alternate or take vacations. The same goes for eyes and ears. The existence of multiple modes of transit between Champaign and Chicago means I can almost always get there, one way or another. The Boeing 777 can fly on only one engine, but both engines are used simultaneously. If you want to be safe, a "belt and suspenders" approach is better than either one alone.3
What, if anything, do parallel pathways have to do with the Patient Protection and Affordable Care Act ("PPACA"), apart from the coincidental usage of two "Ps" in each? In their insightful and tightly reasoned article, Professors Monahan and Schwarcz work their way through a series of interlocking provisions in PPACA and explain how they make it possible for employers to "dump" high-risk employees onto the state-run exchanges scheduled to commence operations in 2014.4
Stated less pejoratively, PPACA makes it possible for employed workers to obtain health insurance coverage through either their employer or an insurance exchange, with differing financial (and potentially health) consequences depending on whether the employer is offering affordable coverage (or coverage at all) and the income and health status of the employee. This parallel pathway expands the options through which employees can get to their desired (and/or mandated) destination—having health insurance.
The existence of a parallel pathway can also create problems. Previous scholarship has focused on whether the exchanges will destabilize the employment-based coverage ("EBC") market because of the substantial subsidies for low-income workers (whether low-risk or high-risk) to obtain coverage through the exchanges.5 Monahan and Schwarcz focus on a more subtle problem: because of the way PPACA is designed, employers can encourage high-risk employees to enroll in the exchanges, while keeping low-risk employees in EBC. The result of such adverse selection will be cheaper EBC and more expensive exchange-based coverage than would otherwise be the case.
What should we think of this particular design detail of PPACA, and what, if anything, should we do about it? Monahan and Schwarcz argue that the parallel pathway they identify is a serious design defect, which will result in major adverse consequences:
[T]here is a substantial prospect that PPACA will lead some, and perhaps many, employers to implement a targeted dumping strategy designed to induce low-risk employees to retain [EBC] but incentivize high-risk employees to voluntarily opt out of ESI [employer sponsored insurance] and instead purchase insurance through the exchanges that [PPACA] establishes to organize individual insurance markets. Although [PPACA] and other federal laws prohibit employers from excluding high-risk employees from [EBC], these laws do little to prevent employers from designing their plans and benefits to incentivize high-risk employees to voluntarily seek coverage elsewhere. If successful, such a targeted dumping strategy would allow employers and low-risk employees to avoid the costs associated with providing coverage to high-risk employees, thereby lowering (perhaps substantially) the costs of coverage under the employer's group plan.6
Monahan & Schwarcz are appalled at this prospect and issue a clarion call demanding immediate reform: "[I]t is imperative for lawmakers to preemptively respond to the prospect of employer dumping."7 Their rhetoric reflects their passionate, normative assessment of the problem they identify. If the problem is not fixed, it will result in "dumping," which will allow employers to avoid their "responsibility" to provide employees with insurance that is comprehensive and not risk rated.8 If employers succeed in "gaming" the requirements of PPACA, it will "corrode the willingness of the broader American population to shoulder the expenses of our country's comparatively high-cost population."9 This "threat" creates a major risk that health reform will be "undermined."10 Given these normative preferences, it is unsurprising that Monahan and Schwarcz respond with nine possible legislative and regulatory reforms.
What is there to be said for Monahan and Schwarcz's diagnosis of the problem and their recommended treatment? Part I of this Response provides some useful background on EBC. Part II identifies several difficulties with Monahan and Schwarcz's analysis, and Part III concludes.