by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
We all know what can potentially happen when one assumes. Obamacare’s success depends on many, many assumptions. It is assumed that the health insurance marketplaces will be self-sufficient by 2015. This assumption stems from a prior assumption that, of the 7 million consumers needed to purchase subsidized private coverage through the marketplaces, over 2.5 million will be young and healthy citizens (ages 18-30). It is assumed that this low-risk population won’t mind engaging in the community-rating tactic where their costly health premiums will subsidize the high-risk population.
Without stepping back to analyze the dichotomy between health care and health insurance, Obama and Co. also assumed that expanding Medicaid would decrease ER admissions. The administration also projected that reducing the number of uninsured would produce positive health outcomes and greater access to care among our nation’s most vulnerable citizens.
Furthermore, drafters of this landmark legislation assumed that the employer mandate would incentivize employers to shoulder the required 60% (at least) of their employees’ sponsored health benefits in order to keep their workers. This provision was also intended to aid the achievement of universal coverage by opening up the individual insurance marketplaces solely to the uninsured living between 100-400% of the Federal Poverty Level (FPL).
Businesses with over 50 employees may be subject to two penalties under the employer mandate; one strong and one weak. The ultimate smack-down penalty is a $2,000 fine per-worker for every worker after the 30th employee if an employer does not provide any health benefits. Meanwhile, the slap-on-the-wrist penalty occurs when an employer does offer coverage, but the firm either does not cover 60% of the employee’s costs or requires the employee to pay a contribution that exceeds 9.5% of his income. In these situations, an employer is fined $3,000 per worker, but only for those who choose to purchase subsidized private coverage on the health insurance marketplace.
In the world of Obamacare, assumptions again backfire and another loophole exists. Currently, a trend is emerging among large businesses with high turnover of minimum wage employees. These businesses, primarily retail and restaurant chains, can now avoid the heavy employer penalty and even possibly not have to face the weak penalty. The solution: "skinny plans."
Under skinny plans, premiums range from $40 to $100 per month, while the only services included are a limited number of primary care visits, preventative services, and generic prescription drugs. Here’s the "skinny" on why large employers opt to offer this coverage and how they avoid government backlash.
More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients
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.
One should never assume.