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Large Employers Considering Idea of ‘Skinny’ Health Plans

Originally published by United Benefit Advisors

Employers that have 50 or more full-time employees will face a choice under the Patient Protection and Affordable Care Act, a choice that is often referred to as “pay or play.”
Pay a hefty penalty — $2,000 per employee — for not offering health care plans, or avoid the penalty by offering insurance that meets the criteria set up by the health care reform law.

But rather than being an either/or scenario, the choice actually is among a continuum of options, which range from providing no coverage to providing comprehensive coverage. And as The Wall Street Journal reported, an option that may appeal to some large companies, especially those with a high percentage of low-wage and/or young workers, is to offer extremely limited health care plans.

These plans, known as “skinny” plans, might only provide coverage for preventive services such as mammograms or colonoscopies and perhaps a limited number of office visits. Among the health costs they would not cover would be more expensive care such as surgeries and, in some cases, even hospital stays. A downside for employers is that while these plans likely would allow them to avoid the $2,000-per-employee penalty, they could subject them to another penalty that is imposed on plans that fail to pass PPACA’s 60 percent minimum value threshold.

That penalty is $3,000, but it is only assessed for eligible employees who choose to use federal premium subsidies to buy coverage through a public insurance exchange.

The expectation is that this penalty will be far lower than the penalty for not having insurance, especially for companies with a high percentage of low-wage and/or young workers, both of whom are less likely than other workers to seek broader, more expensive coverage through an exchange.

The Wall Street Journal’s MarketWatch reported that bare-bones plans “could be the norm for a number of larger chains of restaurants and retailers that hadn’t been required to offer coverage for workers in the past and are too big to fit into the small-business category, where coverage requirements will be much broader.”

Josie Martinez, senior partner and legal counsel for EBS Capstone, a United Benefit Advisers Partner Firm, called the strategy “aggressive,” but also one that is “a viable alternative to staffing companies and/or other companies that operate in a similar fashion.” She also noted that if employees accept the “skinny” plan, they will not be penalized with the individual tax penalty for not having coverage, which, she said, made this strategy “a win-win for both parties” in some respects.

This strategy also might not be one that works in the long term, Martinez said, noting that some may argue that these plans might not satisfy the “minimum essential” coverage criteria. Still, for some organizations, “skinny” plans are a strategy to consider..