Chitose Suzuki/Associated Press
By Christopher Weaver
As the WSJ reported today, some employers are wondering how low they can go when it comes to offering coverage under the new health law, one of several ways companies may try to minimize their costs under the law.
Administration officials confirmed offering bare-bones health coverage to workers could avoid an across-the-board $2,000-per-worker penalty for companies that don’t offer any insurance at all, skirting rules that were widely expected to enrich private insurance.
But, the new law has created a complicated web of rules that can affect companies, workers and the broader market for health insurance. Here are some questions and answers about how the bare-bones plans might work.
1) What is the bare minimum companies need to cover to avoid the broad, $2,000 penalty?
To meet the most basic requirements and avoid the new penalty, companies must offer a health plan that covers a set of preventive services recommended by a government task force, has no annual or lifetime dollar-limits on benefits, and is “employer-sponsored,” Treasury officials said. In the law, it’s called “minimum essential coverage.”
2) How much would it cost?
Estimates from benefits advisers price the overall cost per worker of the most minimal plans at about $400 a year, according to a theoretical estimate by Pan-American Life Insurance Group. Other plans, such as one offered by Dallas-based Group Pension Administrators, would add in benefits such as physicians services and generic drug coverage, and cost about $1,200 a year. The entry-level price for what most people would consider comprehensive coverage is about $3,000 a year for an individual.
3) What kinds of companies will favor the approach?
Businesses with lots of low-wage workers, such as restaurant chains, nursing homes and retailers might be interested in the low-value plans. Historically, many of these businesses haven’t offered coverage at all. Others have offered employees so-called mini-med plans, with low limits on how much they pay out. But those policies will be barred under the law.
4) What if employees want better coverage?
If employees are offered plans that either aren’t affordable or don’t cover at least 60% of expected health costs, they could still opt to join new marketplaces set up by the law known as exchanges, where they could get federal subsidies to buy insurance. To count as “affordable,” coverage would have to cost less than 9.5% of a worker’s income. If a worker did use a federal subsidy to buy a more-robust exchange plan, the employer would have to pay a $3,000 penalty, but just for that employee.
5) Why wouldn’t all the employees get coverage on the exchange?
Even with the subsidies, it’s expensive. According to the Kaiser Family Foundation’s subsidy calculator, a single person earning $10 an hour and working 40-hour weeks would still have to pay $92 each month for a mid-level exchange plan. Companies offering the skinny plans think more workers would rather buy a policy that costs far less—perhaps less than $50 a month—but that also cover fewer services.
6) Under the law, individuals also have to get coverage or face a fee. Would a bare-bones plan meet that requirement?
The same “minimum essential coverage” requirement applies to individuals, so employees who are covered by a skinny plan offered by their employer would be off the hook for a tax penalty for people who go without insurance. However, in 2014, the maximum penalty is only $95 a year, and employers with low-wage workers said they expect many employees to go without coverage if it costs anything at all.
Employers Eye Bare-Bones Health Plans Under New Law – WSJ