Subadhra Sriram's Blog

Skinny is The New Gray Under Healthcare Reform

 Obama cheerleaders have been plugging the fact that when you mandate insurance, pretty much everybody gets insurance.  But here’s the thing: what type of insurance?

That’s where wellness plans or “skinny” health plans rear their head.  These are limited --bare bones --plans that lack key benefits such as hospital coverage. But it could allow employers including staffing firms to avoid the $2,000 per year employer tax on all full-time employees under the Affordable Care Act.

These plans are limited in what they cover -- wellness testing and the possibility of up to five doctor’s office visits per year  -- but typically not hospitalization. . Such plans would offer few services, and would be available at $40 to $100 per month per employee, according to the Wall Street Journal. Federal administrators indicate that this type of “skinny plan” would appear to qualify as acceptable minimum coverage under the law.

The reality is that when the reform was conceived and then went into law, lawmakers left the door open by creating vague definitions of employer sponsored coverage. 

“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 the Essential StaffCARE, health insurance program for the staffing industry.

Dye said federal agencies have verbally indicated such wellness plans would qualify as coverage for eliminating the $2,000 tax. But at this stage, the agencies have not produced anything in writing to specifically confirm the benefits that must be included in such a plan. Further, if such plans are ultimately not allowed, and a staffing company (or other employer) has implemented a “skinny plan” concept before final and specific written confirmation, it could mean millions in tax liability for employers.

Tax liability notwithstanding, Skinny Plans has opened a can of worms. The limited coverage will not appeal to many workers especially those in poorer health who could then visit the subsidized exchanges. If the worker is ill, it’s going to drive up the rate of insuring him or her, further driving up the costs in the marketplace.

And although the plan would prevent the $2,000 tax for employers, they would still be on the hook for $3,000 per year for each employee who receives a subsidy to buy healthcare insurance through an exchange. However it’s expected that the number of temporary workers applying for exchange coverage will be small enough as to still make this a cheaper option and help employers comply with the law.  

Stay tuned. We will keep abreast of changes as regulators decide on how to proceed.


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John Schulien 06/15/2013 12:25 am

"although the plan would prevent the $2,000 tax for employers, they would still be on the hook for $3,000 per year for each employee who receives a subsidy to buy healthcare insurance through an exchange"

Are you sure about this? My understanding is that if your employer offers you a "skinny" health care plan, then you are INELIGIBLE to receive an exchange subsidy because your employer offered you affordable health care and you turned it down.

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