Faced With Extinction, Insurance Insiders Find Nirvana


A Scheme To Avoid or Reduce Accountable Care Act Taxes

By William Rusteberg

“Skinny” group medical plans have been making the news lately. Gleeful insurance agents, consultants, TPA’s and insurance companies are ecstatic , believing that they have found a new marketing bonanza with rich rewards. Whereas ObamaCare ensured eventual extinction, profitable economic survival as a health care intermediary now seems viable once again.

Certain provisions of the PPACA appear to create a big loophole for employers in search of ways to avoid, or minimize ObamaCare taxes.

Mark Holloway, a compliance specialist at Lockton Companies, wrote about the loophole in February 2013, after studying recently released U.S. Department of Health and Human Services implementation guidelines.

Here is a summary of how the scheme is employed – A Scheme To Avoid or Reduce Accountable Care Act Taxes

Numerous insurance intermediaries are jumping on the loophole bandwagon. Fees and commissions to be earned can be enormous. Marketing strategies are geared to entice Plan Sponsors with promises of legal tax avoidance benefits while blinding eager prospects to high fees. Administration fees, commissions and other fees can account for as much as 50% or more of claim costs. There is no MLR provision to worry about.

Some employers are willing to pay anything to avoid punishing PPACA taxes. It’s the bottom line that counts.

Will the loophole survive political scrutiny? Seems unlikely.


Note: SIIA believes that the Federal agencies may conclude that this type of practice violates the new nondiscrimination rules that apply to fully-insured group health plans.  To date, the Federal government has not issued regulations detailing these rules.  In the case of self-insured plans, this practice may already violate the nondiscrimination rules applicable to self-insured arrangements under section 105(h) of the Internal Revenue Code (“Code”).  If not, contemporaneous with the issuance of the new nondiscrimination rules for fully-insured plans, Treasury may add to the current regulations under Code section 105(h), providing that offering low-cost, skinny plans could be discriminatory in certain instances.

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