Employers Offering ‘Skinny’ Health Plans to Avoid Obamacare Penalties
In the latest example of an unanticipated consequence of President Obama’s health care law, one way companies are responding to the implementation of regulations under the law is by dramatically scaling back insurance plans they offer to employees.
Under the regulations created by the Obama administration, employers above a certain size are required to offer coverage for full-time employees. But they may be able to avoid certain penalties under the law by offering their employees very limited plans, which can even lack key benefits such as hospital coverage. These are known as “skinny health plans.”
Contrary to the commonly held expectations that the new health care reform law would incease benefits, skinny health plans are now being pitched around the country by benefits advisers and insurance brokers. They cover minimal requirements such as preventive services, and often little else. Some of the plans don't cover surgery, X-rays, or prenatal care, and others will be paired with limited packages to cover additional services, such as paying out $100 a day for a hospital visit.
This type of plan allows companies with low-wage workers to avoid the $2,000-per-worker penalty for failing to offer insurance coverage.
Devon Herrick, a health economist and senior fellow with the National Center for Policy Analysis (NCPA), says the complexity of President Obama’s health care law leaves room for creative interpretation, allowing corporations to take advantage of loopholes identified by lawyers and accountants.
“Now that the Affordable Care Act provides generous subsidies for coverage obtained outside of work, more employers will downsize their health plans or abandon them altogether,” says Herrick.
Incentive to Eliminate Options, Coverage
Dr. Roger Stark, a health care policy analyst at the Washington Policy Center and a retired physician, says although skinny health plans have similarities to certain health insurance plans, we shouldn’t confuse them with real insurance.
“Some employers are offering their part-time employees skinny health plans. Some are confusing them with health savings accounts (HSAs), which are like IRAs. However, skinny health insurance plans are the antithesis of HSAs. They provide a minimal amount of money—usually between $3,000 and $5,000 worth of coverage. However, if you have a minimum hospital stay, you go through the amount very quickly,” said Stark.
Jonathan Ingram, a healthcare policy analyst for the Illinois Policy Institute, says businesses shouldn’t be blamed for scaling back their employee health plans or replacing them with skinny plans.
“Everything businesses are doing right now is in anticipation of ObamaCare—cutting employee hours, not hiring, offering skinny health plans. These are clearly natural reactions to comply with the most complex law in history,” says Ingram.