Big News! I Just Heard This...Skinny Plans

[The HIC Group]

I had heard rumors about this, and would like more confirmation. A nationally known speaker about PPACA said employers could purchase 3 plans to reach their goals - MEC, MV and their best choice.

Here is the rumor I heard:

The MEC (minimum essential coverage) offered to 95% of the full-time employees gets you out of the $2,000 penalty for not offering coverage. That $2,000 penalty is "across the board", by being assessed on all full-time employees less the first 30. MEC does not need to be "adequate" such as minimum value, nor "affordable" based on the 9.5% rule. That's doable with a skinny plan.

Then the MV (minimum value) increases MEC to become "adequate" by providing at least 60% actuarial value. In the IFP and small group market it's called a Bronze plan, and in the large group market it's called the "minimum value" plan that has 60% or more actuarial value. To get out of the $3,000 penalty, the employer must also contribute enough that this is "affordable" for the employee according to the 9.5% of self-only premium rule. The employer can use the safe harbor of just using the employee's wage shown in Box 1 of the W-2. This gets the employer out of the $3,000 penalty for not having affordable and adequate coverage. (Note that the $3,000 penalty is not "across the board", but is only assessed on full-time employees that get a subsidy in the exchange, less the first 30.)

Then, many employers will offer a 3rd plan which is the plan they really wanted to offer in the first place.

This package of plans may get the employer out of the penalties.

One of the problems is that this package of three employer-sponsored insurance plans would keep employees from getting subsidies for which they would otherwise be eligible. To get a subsidy, you must be under 400% of FPL, and also must not be ELIGIBLE FOR an employer-sponsored plan that is both adequate (minimum value) and affordable (based on 9.5% of family income).

Not every employer will offer all 3 plan designs. Some will offer only MEC to get out of the $2,000 penalty across the board, and will just pay the $3,000 penalty for full-time employees, less the first 30, who get a subsidy. Depending on their size and how many low-income employees they have, this may be a good decision for the employer. It also may be a good decision for employees so that they can get their subsidies. Remember, employees under 400% of FPL can get a subsidy if the MV+affordable option is not offered by their employer. There are employers, however, who may not be that interested in the employee's welfare. If they offer a skinny MEC only, and the employee actually enrolls in it, the employee just lost their right to get a subsidy. Same thing for COBRA participants. ENROLLING IN an employer sponsored plan that meets at least MEC levels will bar you from a subsidy for the months in which you are actually enrolled in it.

Not pretty.

Depending on the employer, offering all 3 may be perfect, even if employees don't take it, or if employees choose the MEC skinny plan(s). Let's say you have an employer with 2,000 employees, mostly lower paid. Hotel, restaurant chain, staffing company, landscapers... They cannot pay $4 million for the "across the board" penalty of $2,000 times every full-time employee. So they offer MEC. But they are compassionate. They offer 7 MEC plans, costing anywhere from $35 to $120 monthly. They also offer the MV and pay as much employer contribution as they can. After all, meeting the 9.5% rule isn't hard. If an employee makes $30,000 a year, 9.5% is $237.50 monthly that the employee can pay for his self-only premium. The employer also doesn't have $3,000 penalties. The employees can not get subsidy because the MV+affordable plan was offered. So, let's say the employer doesn't do the MV+affordable, and either makes it "unaffordable" or only offers MEC (7 of them in this example). Employees can get a subsidy if they want. But take that $30,000 income employee. He doesn't want to pay $237.50 in the exchange for a "subsidized" plan. He wants an MEC plan for anywhere from $35 to $120 a month. If he enrolls in an employer-sponsored MEC, the employer still does not get hit for the $3,000 penalty.

As I said, I'm not claiming to know all the details of this yet. I'm just sharing what I've heard so far.
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Well, I said all that, then read this article in the WSJ, which explains the concept well, as well as other strategies - Health Law Costs: Employers Eye Bare-Bones Plans - WSJ.com.

If WSJ won't let you view it without a subscription, just google the headline "Employers Eye Bare-Bones Health Plans Under New Law", and it will come up.

Ann

You are correct in your detailed overview. Pan America's is quarterbacking this strategy with their Pana"bridge" program. I am currently getting quotes for one of my blue collar union groups. I will keep everyone posted.

 

[The HIC Group]

Ann


Have you put together a 3 tier plan like this for any of your groups?

 

[leevena]

This is not a rumor, rather it is true. What the eventual outcome will be is still up in the air. It does appear to many people, including those in the govt, that this approach could work. There are a few markets currently working on such a plan.

 

[The HIC Group]

This is not a rumor, rather it is true. What the eventual outcome will be is still up in the air. It does appear to many people, including those in the govt, that this approach could work. There are a few markets currently working on such a plan.

Leevena,

Can you provide the markets you are aware of that provide this type of strategy?

Thanks in advance.