Can an employer avoid all of the health law’s penalties by offering a plan that doesn’t cover hospital care?
That’s the question sparked by a new variant of the “skinny” plans that some employers are adopting. The older skinny plans often cover preventive care but little else, and they are designed to get employers out of the law’s about-$2,000-a-head penalty for not offering coverage. They still leave the employers open to the law’s other penalty, which is about $3,000 for any worker who turns down the benefit and gets a subsidized plan through an exchange.
Now, some benefits administrators are pitching somewhat-less-skinny plans that they claim protect employers against the $3,000 penalty as well – by meeting the law’s standard of covering at least 60% of the cost of health care. Yet one such “minimum value plan” that is being sold to employers still lacked coverage for inpatient hospital treatments, procedures at ambulatory surgery centers or most maternity care, according to a document viewed by The Wall Street Journal
The plans are cheaper than coverage with more complete benefits. But they are a “better benefit offering” than the preventive-only skinny plans, and the employer is “shielded from both penalties,” says Rebecca McLaughlan, managing director at brokerage McGraw Wentworth, part of Marsh & McLennan Agency. Ms. McLaughlan says she has some clients who are moving forward with the minimum-value plans, which can offer other benefits such as doctor visits and prescription-drug coverage, but she is warning them about regulatory uncertainty surrounding them.
Lawyers say that federal regulators are likely to issue guidance that will say the minimum-value plans lacking hospital coverage do not meet the 60% coverage threshold, which could leave employers using them subject to the $3,000 penalty. “It’s likely that regulators will move against this type of plan and eliminate it as an option at some point in the future,” says John Barlament, an attorney at Quarles & Brady. Though the strategy “probably works” in the short term, it probably won’t within a year or so, he says.
Asked about the minimum-value plans among other strategies, a Treasury Department spokeswoman said the department “will continue to monitor possible employer actions that might be contrary to the intent of the law and consider what responses, if any, might be appropriate.”