Your Organization and Healthcare Reform
Skinny Plans: What You Need to Know
As January 1, 2014, closes in on employers, they have begun to respond to potential loopholes created by the incomplete guidance issued with respect to the Patient Protection and Affordable Care Act (PPACA). One strategy some employers have considered is skinny plans.
What are skinny plans?
Skinny plans are very limited self-funded plans that can lack key benefits. These plans cover the benefits mandated under PPACA–preventive services. However, no other categories of care are provided under these plans, such as hospital, physician, emergency, prescription drug or labs. Often these skinny plans are paired with limited hospital/fixed indemnity plans to make them more attractive to employees.
Why are some employers considering skinny plans?
This strategy is being considered by employers that have not generally offered health coverage to large numbers of full-time employees. Employers are hoping that by offering these plans, they will not only avoid the hefty $2,000 penalty per full-time employee for not offering minimum essential coverage, but also avoid (all or some) of the $3,000 penalty per full-time employee that obtains subsidized coverage on a public exchange. Overall, employers hope that employees will find the cost of the skinny plan more attractive, thus motivating the employees to elect the employer’s skinny plan and not go to a public exchange.
Are skinny plans a viable option?
From a technical standpoint, as of June 2013, these plans appear to satisfy the “minimum essential coverage” requirement of PPACA. There is no specific guidance that precludes employers from offering these plans, because neither the law nor regulations issued to date define “minimum essential coverage” completely. However, regulators are aware of the skinny plan approach, and it is prudent to expect that all regulatory bodies will be addressing the issue, sooner rather than later. In fact, in guidance issued earlier this year, regulators unequivocally stated that they will issue more guidance on minimum essential coverage in the future. Moreover, we are anticipating guidance relating to nondiscrimination requirements which may also impact the viability of skinny plans. Therefore, take caution when considering these plans for the reasons set forth above. If you are considering a skinny plan approach, you should consult with your legal counsel.
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