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.
Now, as employers race to find ways to cover their full-time
workers while holding a lid on costs, insurance brokers and benefits
administrators are pitching a variety of options, sometimes exploiting wrinkles
in the law.
The Medicaid option is drawing particular interest from
companies with low-wage workers. If an employee qualifies for Medicaid, which
is jointly funded by the federal government and the states, the employer pays
no penalty for that coverage.
Locals 8 Restaurant Group LLC, with about 1,000 workers,
already offers health coverage, and next year plans to dial back some
employees’ premium contributions. That is because an employer can owe penalties
if its coverage doesn’t meet the law’s standard for affordability.
Big employers with significant Medicaid enrollment in their
workforces have been a political flash point in some states. The health law
aimed to expand Medicaid eligibility to most people with incomes at or below
138% of the federal poverty level, but not all states have adopted that
standard.
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. 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. Ruiz
Protective Service Inc., a 400-employee firm that provides security services
and polygraph tests, plans to start a skinny plan in January. The company can’t
afford the about $2,000-per-worker penalty or traditional insurance. He said he
thinks the preventive-care policies will be affordable for employees, and the
company will be upfront about the coverage limits.
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.
Some employers are mixing strategies to hold down costs. At
least a few companies are resigned to paying penalties, but are trying to
minimize the bite.
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