We already understand that, after January 1, 2015, employers with the equivalent of 50 or more full-time workers to provide health insurance or else pay a $2,000 per employee fine. We know that “full-time” means 30 or more hours per week over a measurement period. But in the midst of discussion about who has to offer and who will get coverage, the question has arisen about what coverage will actually have to be offered by a large employer. The concept of “skinny” plans has started to emerge as a possible option for large employers looking to keep coverage costs lower.
Skinny plans are essentially an outgrowth of “mini-med” plans that are set to be phased out. Mini-meds offered very limited coverage, but they also were very affordable. Some companies offered mini-meds to their part-time employees as an option to provide at least some coverage when they were not eligible for the plans offered to full-time employees. The theory is that, unlike the exchange plans, large-employer plans that are sponsored by an employer do not have to cover the 10 categories of services in the health care law’s essential health benefits. Thus, they are less expensive, but they provide a lower benefit that an exchange plan.
Skinny plans will have still have to cover preventive services like vaccines and cancer screenings without any cost-sharing. They also cannot have annual dollar limit (or cap) on benefit payments. But the key is that these plans limit the service that they cover that typically cause large medical claims. By covering less, there is a lower claims experience so the plan is less expensive to maintain. For example, a skinny plan might provide a very limited benefit for hospitalizations or surgeries. It might also limit the number of doctor visits or prescriptions available to participants. The cap would be on the number, not the dollar-value of the benefits so they would not have a concern about the restriction on the annual dollar caps. Anyone wanting better coverage could then opt out and go into the exchange.
What has really started the discussion on these plans is that the Treasury Department has confirmed, informally, of course, that it looks like a properly designed skinny plan would satisfy PPACA rules. But without formal guidance, an employer offering a skinny plan might find themselves subject to penalties if it is subsequently determined that a skinny plan does not constitute offering qualifying coverage to avoid the penalty. So it is by no means a clear-cut solution. However, employers who are diligent about evaluating the risk associated with PPACA compliance can consider a skinny plan as part of their overall compliance strategy. But it should not be the only thing considered. Employers need to get with their professionals to continue to evaluate the overall risks. Choosing to not offer coverage at all, offering a skinny plan, or offering a regular full-coverage plan all have cost and risk concerns that should be fully evaluated before a final decision is made. We may have been given a little more time to plan, but that is no excuse for not knowing and evaluating all the options.
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