Bare-Bones Health Plans Survive Through Quirk in Law
By Theo Francis
The Wall Street Journal, January 16, 2014
The health-care overhaul was supposed to eliminate insurance plans that offer skimpy coverage at cut rates. But a quirk in the law stands to help some companies keep them going for years to come.
AlliedBarton Security Services, a closely held firm that employs more than 63,000 people nationwide, has offered a modestly updated version of its so-called mini-med plan to employees this year and it intends to do so in 2015 as well, even though the cheap coverage fails to meet requirements of the Affordable Care Act.
What makes the no-frills plan attractive is that it will save money for AlliedBarton and for its security-guard employees who don’t incur substantial medical bills, many of whom want a low-cost option, according to the company.
What makes it possible under the health law: As long as companies offer at least one plan that complies with the law’s requirements, they are free to keep offering ones that don’t.
That has enabled companies to find ways to comply with the law while minimizing increases in their health-care costs. The result has been an increase in lean insurance offerings such as “fixed-indemnity” plans.
Such plans, which might cost an employee just $80 a month in premiums, generally pay a set amount for specific medical services—$70 for a doctor’s visit, for example, or $20 for a prescription—without regard to the underlying cost. They limit the amount of payments or care available in a year, and can exclude entire areas of coverage, such as mental-health care. When catastrophic injury or illness strikes, they often pay little.
AlliedBarton intends to offer its employees two low-cost insurance options—one that meets the law’s requirements for both scope of coverage and affordability, and a cheaper plan that falls short. Offering the compliant plan heads off the law’s penalties. And offering the cheaper plan—which the company thinks most of its security guards will pick—keeps costs down.
Employees who pick the cheaper plan could have to pay the individual penalty—though that could still cost them less than signing up for the more expensive plan.
Fixed-indemnity coverage “violates the spirit of the law,” said Jay Angoff, a Washington lawyer who previously headed the federal insurance-oversight office and served as Missouri’s insurance commissioner. “There’s a strong argument that it is inherently misleading, and it provides so little coverage that it shouldn’t be sold at all.” Such plans, he adds, “were never intended to survive past 2014.”
AlliedBarton’s Mr. Buckman countered that workers are good at weighing medical and financial trade-offs. “To a lot of people for a lot of good reasons, fixed-indemnity plans may be a better choice, and we think it’s appropriate for people to be able to make choices,” he said.
http://online.wsj.com/news/articles/SB10001424052702303754404579312760133827256
Comment:
By Don McCanne, M.D.
What kind of rule is this? As long as employers offer to their employees a plan that complies with the requirements of the Affordable Care Act (ACA), but a plan that the employees cannot afford to purchase, then the employers are relieved of their penalties for providing them with almost worthless “fixed indemnity” plans, even though that means that the employees may have to pay a penalty for failing to be insured with a qualified plan.
ACA was designed to interfere as little as possible with employer-sponsored plans since supposedly that large sector of the health insurance market was working so well. But it wasn’t for far too many. Employers offering mini-med style fixed indemnity plans is only one of the potential deficiencies of employer-sponsored coverage, others being high deductibles, narrow provider networks, and forgone wage increases to pay for the coverage.
Right now, several respected journalists are criticizing single payer advocates for being critical of the health care gains under the Affordable Care Act. They have it all wrong. We are not critical of the gains; we are critical of the failure to correct the major deficiencies in our system that cause so much suffering and financial hardship. Instead of tweaking a mediocre system, we should fix it. We could do that with a single payer national health program – an improved Medicare that covers all of us.