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A new type of healthcare plan could provide employers such as staffing firms a low-cost way to eliminate the $2,000 per year employer tax on all full-time employees under the Affordable Care Act. But whether such plans will ultimately be allowable is currently a gray area, said J. Marshall Dye, founder and president of Insurance Applications Group, the parent company of Essential StaffCARE, a health insurance program for the staffing industry.
These plans are called “wellness plans” or “skinny” health plans. The Wall Street Journal covered them in a story on May 20.
Such plans would offer few services, and would be available at $40 to $100 per month per employee, according to the Wall Street Journal. Offering such plans might allow employers to eliminate taxes for not offering government-qualified health insurance at all by providing something affordable to firms with low-wage workforces. Employers offering no insurance face a possible penalty of $2,000 per full-time worker per year starting next year if at least one worker receives a subsidy to buy healthcare coverage at a state exchange.
The plans would not deflect a potential penalty for employers whose plans do not provide “minimum essential coverage.” However, theoretically, taxes could be lower in this case — employers would pay a tax of $3,000 per year for each full-time worker who receives a subsidy rather than $2,000 for all workers under the other tax.
Still, a problem with the $3,000 tax for employees that obtain exchange subsidies is the uncertainty of the tax liability, Dye said. Staffing companies could be surprised with a significant tax bill at the end of the year. Companies will have to create a reserve of funds for this reality. Will it be easy or difficult to obtain a subsidy? The government has budgeted nearly $200 million to hire “Navigators” at $18 to $40 per hour; these unlicensed federal employees will assist applicants in obtaining health insurance subsidies.
Dye said federal agencies have verbally indicated “skinny” plans would qualify as coverage for eliminating the $2,000 tax. But the agencies have not produced anything in writing to specifically confirm the benefits that must be included in such a plan, and most importantly, if this type of plan alone will eliminate the $2,000 tax.
“We’ve tried to be a voice of caution,” Dye said. “Until we get some real specific verbiage from Treasury and [Health and Human Services] that is specific to this question, I cannot guarantee anyone that a wellness benefit will get you past that [$2,000 tax].”
If such plans are ultimately not allowed — and a staffing company has implemented a “skinny plan” concept before final specific written confirmation —it could mean millions in tax liability for employers, Dye said. And questions continue to swirl over numerous aspects of the Affordable Care Act with nearly 20,000 pages of regulations that clarify and implement the 2,700-page law.
“It’s a tough situation and it’s just one of many tough situations the insurance industry finds itself in,” he said. “We just take a conservative approach with the best interest of our clients in mind.”
In one discussion, a federal representative even indicated that employees who take part in such plans might be prohibited from receiving subsidies to buy insurance on a state exchange, Dye said. This could incentivize workers not to take such plans.
Also of note, skinny plans are not “mini med” plans. Typical mini-med plans were similar to major medical but have annual limits. Dye said workers in high-turnover temp jobs rarely reached their annual limit. Healthcare reform curtailed certain “co-insurance” mini meds that required co-pays and deductibles. The current type of mini med plan is based on an indemnity platform which pays a fixed amount for claims per day. These plans are good now and will continue past 2014. They will not count for coverage under healthcare reform because indemnity plans are considered supplemental insurance.
“These indemnity style plans provide temporary employees that find coverage at the exchanges (even with subsidies) too expensive, with usable and needed healthcare benefits at a low cost,” Dye said. “Indemnity mini-meds give a staffing company a real recruiting and retention tool. In the face of health care confusion, mini-med implementations continue to increase.”
Dye said mini meds offered more coverage than the proposed wellness plans which are limited in what they cover to activities such as wellness testing and the possibility of up to five doctor’s office visits per year.