By Christopher Weaver and Anna Wilde Matthews
The Wall Street Journal, May 19, 2013
Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.
Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all.
Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing.
The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs.
But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. C +0.20% report. Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.
Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms.
Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.
Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year. Some employers are “thinking of this as a replacement for the mini-med plan,” said Tracy Watts, national leader for health-care reform at Mercer, a consulting unit of Marsh & McLennan Cos.
San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July. The new plan… will cover only preventive services, six annual doctors’ visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn’t cover surgeries or hospital stays.
Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery.
By Don McCanne, M.D.
Imagine health insurance not covering hospitalizations nor surgery. Yet this is still possible because the Affordable Care Act applies the essential health benefit requirement only to plans for small businesses and individuals and not to larger employers.
This has opened up the opportunity for a conspiracy between larger employers who could care less whether or not their employees have health insurance and private insurers who are quite willing to sell these almost worthless bare-bones products as long as there is a profitable market for them.
The solution is obvious. Cover all care that people need, and then provide that coverage to everyone, automatically. Maybe these uncaring employers might not like that, but when the taxes to pay for an equitable system are obligatory, they would get used to the idea of their employees being able to obtain health care when they need it. Not such a bad idea after all, especially when their competitors are treated the same.