When federal officials and lawmakers drafted the Affordable Care Act legislation, the hope was that the law would enrich health care benefits. However, because they left the definition of employer-sponsored coverage somewhat vague, it is now apparently opening the door to some unexpected interpretations. The result? Limited health care plans that may be sufficient to satisfy the law, but don't offer key benefits to workers such as hospital coverage.
This scenario happened to come up in conversation the other night at a backyard barbecue I attended with some friends. The host owns a number of senior housing facilities, primarily in smaller, outstate communities. Obviously he has some skilled nursing positions and higher wage caregiving employees, as well as an office staff, but more of his employees are low-wage, low-skilled workers.
This company owner, whom I had not met previously, told me over burgers his business is going well overall. I told him I have been exposed to some of the vagueries of the new federal health laws via Staffing Talk, and asked him what he thought about the future.
He echoed what many have said on this site, that his biggest worry is simply the unknown. He went on to say, though, that he was recently told by a benefits administrator he could offer a health care plan that would merely cover preventive services, and it would appear to qualify as "acceptable minimum coverage" under the law. This would allow him to avoid the across-the-workforce penalty for companies that offer nothing.
A health care plan that would merely cover preventive services appears to qualify as "acceptable minimum coverage" under the law.
These so-called "skinny plans" wouldn't cover surgery, X-rays or prenatal care among other things, although they can be combined with limited packages to cover additional services such as a hospital visit.
A recent piece in the Wall Street Journal says more than a dozen brokers and benefits-administrators are discussing this strategy with clients all across the country.
"There had to be a way out of the penalty for employers with low-wage workers," said Todd Dorton in the Journal piece. He is a consultant and broker for Gallagher Benefit Services Inc., who has enrolled several employers in the limited plans.
"There had to be a way out of the penalty for employers with low-wage workers."
Not everyone is convinced though that the limited plans will hold up under regulatory scrutiny however. The Journal piece notes that many employers and benefits experts have understood the rules to require robust insurance, covering a list of "essential" benefits.
Dr. Robert Kocher is a former Special Assistant to the President for Health Care. He tells the Journal, "We wouldn't have anticipated that there'd be demand for these types of band-aid plans in 2014. Our expectation was that employers would offer high quality insurance."
"We wouldn't have anticipated that there'd be demand for these types of band-aid plans in 2014. Our expectation was that employers would offer high quality insurance."
Of course when you leave the definition of "high quality" out, you leave open the door to a wide variety of potential workarounds, which is what is happening already.
Self-insurance is something small employers are paying particularly close attention to. It will face fewer changes under the law, because Congress didn't want to disrupt existing self-insurance arrangements.
It was already growing before President Obama signed the law in 2010, and it is undoubtedly going to become even more prevalent. It is believed that more than 60% of private sector workers with health care coverage are in self-insured plans.
When companies are self-insured, they assume most of the financial risk of providing health benefits to employees. Instead of paying premiums to insurers, they pay claims filed by employees and health care providers.
If you are a small employer, particularly if you have a younger, healthier workforce, this may become an increasingly attractive option. However, opponents say this could drive up costs for workers at other companies.
“The new health care law created powerful incentives for smaller employers to self-insure,” Deborah Chollet tells The New York Times in this piece on health care costs. She is a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.”
Two words pop into my mind as I delve further and further into this law: Unintended consequences.