The Skinny Insurance Loophole

If you have signed up for your company’s health insurance plan, you will want to read your policy’s fine print. You may not have the type of coverage that you think you do. Yes, thanks to a piece of faulty legislature, you could be one of the many Americans that has fallen victim to the “skinny insurance loophole.”

What is the “loophole?”

The Affordable Care Act—love it or hate it—has, caused a major kerfuffle in the business realm. With all companies who employ at least fifty full-time equivalent employees being required to offer health insurance coverage to their workers, many have sought out the most affordable option possible. And, in many cases, this involves turning to what many refer to as a “skinny” plan.”

So, what exactly is a “skinny plan?” Staffing Industry Analysts’ “Benefit of Counsel: The Skinny on Skinny Plans “ states that prior to the ACA, employers would have referred to these plans as simply “wellness benefits” as they “cover only non-catastrophic health exposures like wellness benefits, preventative care, and certain routine medical care.” If you have one of these plans and you find yourself or one of your family members in the emergency room, you may also find yourself severely out-of-pocket.

According to “Survey Shows Many Companies to Offer Skimpy Health Insurance Plans,” it seems that the industries in which these skinny plans are most prevalent are chain restaurants, hotels, and others that, historically, have not offered health insurance to their workers.

Closing the Loophole

Before you give your employer the evil eye, it is important to note that they have likely provided the bare minimum coverage as stipulated within the ACA. The problem is, in fact, the way that the ACA’s “minimum value calculator” works. NPR’s “Employers Can’t Skip Insurance Coverage for Hospitalization” explains that “unlike insurance sold to individuals and small employers, large companies aren’t required to offer the health law’s ‘essential health benefits,’ including hospital services. But most analysts assumed that the minimum value calculator—testing whether insurance pays at least 60 percent of expected medical costs for a given plan—would require hospital care, but it does not.” Your employer, therefore, has followed the rules. The rules, however are flawed and inequitable rules.

Thankfully, the Obama administration has taken action and introduced Notice 2014–69, a notice in which the Treasury Department and the Department of Human Health Services states that any health plans that fail to offer both hospital and physician services will no longer be deemed compliant under the ACA. According to “HHS Closes Loophole on Skinny Plans,” the notice states that plans without inpatient hospital and physician services coverage will not meet minimum value and plans put in place before November 3, 2014 will not be penalized but will have to change at the end of the contract.”

And, it includes good news for anyone who finds themselves with the bare bones coverage of their employer’s skinny insurance plan as it offers a resolution.

Solving Your Dilemma

Don’t panic if the fine print on your contract bears bad news. In order to eradicate the woes brought on by skinny plans, the Obama administration has introduced a way to solve your dilemma. Traditionally, employees who were offered minimum-value coverage at work would be ineligible for federal tax credits if they purchased a plan through the marketplace. According to Kaiser Health News’ “Obama Administration Closing Health Law Loophole for Plans Without Hospitalization”, however, “in no event, will workers given an employer plan without hospital coverage be disqualified from the subsidies.” Plus, large employers who fail to offer minimum value coverage next year could face fines of up to $3120 per employee.

So, grab your policy and find out if you, in fact, hold a skinny policy. If so, you will want to venture over to the Marketplace and make sure that you and your family are fully covered—just in case.

Does your employer offer “skinny plans?” If so, do they make it clear that that’s what you are getting?