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.
- The employer mandate requires that employers provide minimum essential coverage. Any employer-sponsored health plan qualifies as one of the defining mechanisms under "minimum essential coverage." So, essentially, this definition means that employers are not subject to the heavy penalty so long as they offer any plan sold within the state. As of late, large firms and insurance companies have capitalized on the broadly defined "employer-sponsored health plan." The Wall Street Journal writes:
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.
- Financially, it makes sense for large firms comprised of low-wage workers and with frequent turnover to offer such skinny plans. As of now, roughly one-quarter of minimum wage workers accept this type of coverage. Most reject these plans because they would rather pocket extra income than dedicate a large portion of their hours just to pay for this fringe benefit.
- In the case of low-wage employees who do not opt for the skinny plans and do not seek subsidized coverage on the individual marketplaces, firms may not end up having to pay any fine at all.
- Large employers can offer skinny plans since they are not required to offer the mandated ten "essential health benefits," unlike the individual marketplace plans and small group plans outside of the marketplaces. Fully insured large employer plans and self-insured plans are exempt from having to cover these extra benefits and services.
One should never assume.
Click here for the Health Care Update archive.
