For the past few years, American health insurance companies have been hard at work studying a loophole in the Affordable Care Act—a.k.a. Obamacare—that allows corporations to evade the law's effort to keep people from going broke when paying for basic medical services. Insurers like UnitedHealthcare have created insurance packages known as "skinny plans" that give employers the ability to peddle strikingly shoddy health insurance to their workers. Existing in a regulatory gap that only applies to large businesses, these insurance plans do not cover basic health necessities like hospitalization or emergency-room care but still allow employers to avoid the largest automatic fine under Obamacare, which, beginning this month, requires large businesses to provide insurance to all full-time employees.
Skinny plans often cover only preventative care like going to see the doctor for a routine check-up—hardly the type of medical attention that racks up huge bills.
One "Webinar" presentation delivered in part by UnitedHealthcare—a subsidiary of UnitedHealth Group, America's largest health-insurance provider—marvels almost incredulously at the loophole. Employers "can offer preventive-care benefits like doctors' visits and generic drugs without offering much in the way of care," states a portion of the joint presentation given by Crawford Advisors, a benefits consulting and brokerage firm, "and they are considered to be offering insurance coverage." The Crawford Advisors presentation is explicit about the fact that these plans can be marketed to low-wage workers who might take the skinny plans because of their price. In some cases, low-wage workers who take these skinny plans will be passing up either subsidized insurance on state insurance exchanges or more robust employer-sponsored insurance that is considered affordable by the standards of the new health law.
Workers' advocates worry that companies may fail to adequately warn employees of the deficiencies of such plans.
"These are dangerous because I can see workers taking the coverage thinking it's full coverage, assuming it is because of the ACA [Affordable Care Act]," says Sara Flocks, the public policy coordinator at the California Labor Federation, "and then getting hurt or getting sick and going into medical bankruptcy—which is exactly what the ACA was supposed to eradicate."
In 2014, labor groups in California lobbied for a bill that would have banned skinny plans in the state. The bill passed the state legislature but was opposed by the insurance industry and vetoed in September by Jerry Brown, the state's Democratic governor, who expressed concern it violated federal law.
That veto could have had a real effect on workers in the state. A survey released in August by the National Business Group on Health found that nearly one in six large employers in the United States are considering offering these plans. And anecdotal accounts suggest a high level of demand for the shoddy insurance packages among employers.
"There was definitely more interest than we anticipated there would be, " Scott Thompson, an advisor at Indianapolis-based business consultancy called FirstPerson, told me of skinny plans. He identifies typical low-wage sectors as those most interested in the cheaper plans: "There are staffing firms, restaurant, hotel, tourism, those industries where [previously] managers were only provided benefits and now you've got to provide it to everybody working [at least] 30 hours."
A description within the joint presentation with Crawford Advisors and also a separate PDF available on UnitedHealthcare's website describe the insurance giant's own skinny plan, the most basic form of which offers only preventative care.
"This is really bad stuff," says Beth Capell, a lobbyist who represents Health Access California, a statewide health care consumer advocacy coalition, and who reviewed both documents. "This is what [the law Brown vetoed] was aimed at outlawing in California."
Under Obamacare's employer mandate, there are two categories of fines that large employers face for not providing adequate coverage to their workers. The first and most severe penalty is triggered when a large employer does not offer any insurance at all; in this case, the IRS slaps it with an automatic, across-the-board fine of $2,000 dollars per employee beyond the first 30. The second type of penalty kicks in when a large business does offer an insurance plan that meets a number of basic criteria (known as minimum essential coverage) but does not meet the law's standard of affordability, thereby making it possible for employees at the company to go get subsidized insurance on the state healthcare exchanges. For each employee that does so, the company gets fined $3,000. (New regulations issued by federal agencies in November make clear that plans not covering hospitalization cannot be considered affordable.) Thus employers who offer only skinny plans to their workers are likely betting that most employees will simply take the barebones company plans rather than seeking more robust—and potentially even cheaper—insurance on the state exchanges.
Another skinny-plan approach—and what might prove to be the most popular route—shields employers from both types of penalty under the health law. Businesses can offer both a skinny plan and at least one other insurance plan that does meet the ACA's affordability standard. Because employees have the option of taking affordable, ACA-compliant healthcare, they are not technically eligible for subsidies to buy insurance on the state health exchanges. For those employees who take the cheaper, skinny option, it's a boon to the employer, who gets let off the hook for offering real insurance.
UnitedHealthcare did not respond to a list of questions sent by VICE regarding this story, but said in an email, "We work with clients to identify plans that comply with the Affordable Care Act and that meet their needs." This suggests that UnitedHealthcare is advising clients to take this latter, less risky route to offering skinny plans, and some of its publicly available literature suggests the same.
When asked whether some employees might mistakenly sign up for skinny plans, Reagan M. Crawford, the founder of Crawford Advisors, told me that because skinny plans, too, are considered a form of health insurance, firms offering the plans are required by law to be clear to employees about what they cover. "Do I think there might be an unscrupulous employer? Absolutely," he says, "but if they are, they're violating all kinds of rules.
"If there are things that will accomplish specific needs," adds Crawford, "why not explore those as alternatives as long as they don't break the law?"
Although UnitedHealthcare has marketed its own skinny plan, Capell, the California healthcare lobbyist, says that larger insurers have generally stayed away from offering the plans. (In October, the Wall Street Journal reported that Cigna was also offering a skinny plan.)
"Most of the major insurers did not oppose the legislation because they're not selling the junk insurance," Capell said in reference to the vetoed California bill, which she says she will push legislators to reintroduce in next year's legislative session. "But where there's a market for bottom feeders, you'll always find some corporation bumping along the bottom."
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