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Some Employers To Offer Low-Benefit 'Skinny' Plans

WebMD News from Kaiser Health News

By Jay Hancock

Tue, Aug 12 2014

Nearly one company in six in a new survey from a major employer group plans to offer health coverage that doesn't meet the Affordable Care Act's requirements for value and affordability. 

Many thought such low-benefit "skinny plans" would be history once the health law was fully implemented this year. Instead, 16 percent of large employers in a survey released Wednesday by the National Business Group on Health said they will offer in 2015 lower-benefit coverage along with at least one health plan that does qualify under ACA standards.

The results weren't unexpected by benefits pros, who realized last year that ACA regulations would allow skinny plans and even make them attractive for some employers. But the new survey gives one of the first looks at how many companies will follow through and offer them.

"It is a little higher than I would have expected but does not surprise me," says Timothy Jost, a law professor who specializes in consumer health at Washington and Lee University in Virginia. "It would be interesting to know what sectors of the economy these employers are in." Low-benefit plans traditionally have been offered by hotels, restaurant chains and other lower-wage industries, Jost said, "but this may be spreading."

The survey compiled responses from 136 large employers. The large majority -- 81 percent -- will offer only plans that meet the health law's tests for minimum value and affordability. The study didn't identify which industries made up the 16 percent that will offer low-benefit plans.

"My guess is that they are probably in those industries with low-wage employees where they have historically not been attracted to taking a lot of their paycheck for coverage and wanted something smaller," said Steve Wojcik, vice president of public policy at the National Business Group on Health.

Skinny plans are part of a two-step strategy that lets workers and employers avoid health law penalties but may not produce substantial coverage. Some skinny plans cover preventive care and nothing else -- no inpatient or outpatient hospital treatment, says Edward Fensholt, a benefits lawyer with Lockton Companies, a large insurance brokerage and consulting firm.  

It works like this: Employers can shield themselves from health law penalties by offering insurance that meets tests for affordability and value -- regardless of whether anybody signs up. At the same time, workers can avoid the ACA's individual penalty by enrolling in a company skinny plan, which qualifies as "minimal essential coverage" for individuals under the health law by the mere fact that it's employer-sponsored.

In practice, employees in low-pay industries often decide that the substantial plan is too expensive even though it meets ACA standards, Fensholt said.  (The ACA says coverage is affordable if the employee's contribution is 9.5 percent of household income or less.) 

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