Some Employers May Keep Offering Skimpy Health Policies, Even Under Obamacare

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Some large employers are likely to continue offering skimpy health coverage to their workers, according to a report from Kaiser Health News and the Washington Post. The bare-bones plans charge consumers very low monthly premiums but often don’t provide important benefits such as coverage for hospital stays — and large companies could keep using them to meet Obamacare’s minimum coverage requirements because they aren’t subject to all of the same standards as individual and small business health plans under the reform law.

The vast majority of large employers already offer acceptable health coverage by the standards set in Obamacare. But some employers — particularly in the retail, service, and hospitality sectors — with low-wage employees have traditionally denied workers these benefits. Beginning in 2015, they won’t be able to get away that anymore. All companies with 50 or more full-time workers must begin extending a minimum level of coverage, and those that don’t offer some form of health policies to employees working 30 hours or more per week will have to pay a $2,000 per employee fine after the first 30 workers. Companies that offer inadequate health plans — defined as any plan that covers less than 60 percent of a worker’s medical costs — will have to pay another $3,000 for each employee who receives federal subsidies to buy a plan through one of Obamacare’s insurance marketplaces.

But companies are willing to take the risk because they think that a substantial number of low-wage part-time workers will actually prefer the “skinny” policies to the far more robust and government-subsidized plans available in the Obamacare marketplaces, since bare-bones plans’ premiums are so low. These plans will cover the minimum requirements that Obamacare imposes on large employers — including free preventative health care without a co-pay — but could forgo more important and costly benefits for things like hospital visits, unless federal regulators change course and expand large employers’ coverage requirements.

Public health advocates say that would be an untenable status quo. “People need to be covered for hospitalizations,” said Lydia Mitts of the advocacy group Families USA in an interview with Kaiser Health News. “It’s important for employers to do the right thing and they should not just look at the minimum requirements of the law.”

That may not be what ends up actually happening. Neil Trautwein, employee benefits policy counsel for the trade group the National Retail Federation, told the outlet, “I think you will continue to see employers in many industries…carefully calculate their strategy for [Obamacare] compliance” through the use of bare-bones plans. “As always, the interest is to limit cost increases.”

That’s certainly been the trend in employer-sponsored health insurance. Companies have been steadily increasing the share of workers’ contributions to their health coverage by offering health plans with high deductibles and low premiums — but have not hiked employees’ wages by any comparable amount. In fact, workers’ contributions to employer sponsored health plans have risen by 74 percent since 2003 even though medical inflation has only raised premiums by 62 percent over the same period. And wages only saw a meager 10 percent increase in the last decade.

Certain employers may pursue the “skinny plan” option in the short-term. But it’s also possible that they will take advantage of Obamacare provisions that don’t kick in until later this decade. For instance, the statewide insurance marketplaces that will be available for individual and small business coverage will open up to large employers in 2017. Firms and workers alike may find the combination of government subsidies to help buy insurance through the marketplaces and the more generous coverage a better option later down the line.