Companies Try to Escape Health Law’s Penalties - Some Employers Seek to Shift Employees to Medicaid; Others Plan to Offer ‘Skinny’ Benefit Plans

From The Wall Street Journal:

With companies set to face fines next year for not complying with the new mandate to offer health insurance, some are pursuing strategies like enrolling employees in Medicaid to avoid penalties and hold down costs.

The health law’s penalties, which can amount to about $2,000 per employee, were supposed to start this year, but the Obama administration delayed them until 2015, when they take effect for firms that employ at least 100 people.

Another idea gaining ground with employers is offering bare-bones, or “skinny,” health plans that cover preventive care but exclude major benefits like hospital coverage. These low-cost plans differ from the now-illegal “mini-med” plans that capped benefits. Though skinny plans offer a narrow range of benefits, they don’t limit payouts.

Making such plans available allows employers to avoid the approximately $2,000-per-employee penalty for not offering coverage to at least 70% of their full-timers. And workers who sign up won’t face the law’s penalties for individuals lacking insurance.

Since skinny plans don’t meet the federal standard of covering 60% of the cost of medical care, they can still leave an employer vulnerable to a different fine—about $3,000 for each worker who opts out and instead gets a federally subsidized plan through an insurance exchange. Employees can’t get subsidies if their employer offers insurance that meets the law’s standards for coverage and affordability.

Major insurers such as UnitedHealth Group Inc. and Cigna Corp. are marketing skinny plans. Cigna said it offers such plans alongside richer alternatives and with “transparent and clear communication to ensure customers fully understand their health-care coverage choices.” The insurer said companies have shown growing interest in the plans, but relatively few have adopted them.

UnitedHealth said it works with clients to identify plans that comply with the Affordable Care Act and “meet their needs.”

Other vendors say interest in skinny plans is brisk. “It’s just crazy how many we’re writing,” said Jeff McPeters, a principal owner at Group & Pension Administrators Inc.

Federal officials have said most large employers already offer coverage that meets the law’s requirements. The companies worried about penalties are largely in industries with significant low-wage workforces, such as restaurants, nursing homes and hospitality. Previously, many of these companies didn’t offer coverage to hourly workers or had mini-med plans.