Skimpy Health Plans

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Skimpy health plans

Updated January 6, 2016

One of the pillars of the Affordable Care Act — the 2010 federal law often nicknamed “Obamacare” — was a requirement that nearly all Americans have health insurance, whether it’s provided by an employer or purchased by an individual (or, in cases such as Medicare and Medicaid, provided by the government). Before the law went into effect, most states had dysfunctional non-employer insurance markets either because they allowed insurers to discriminate against applicants based on preexisting health conditions, or because they outlawed this discrimination but didn’t require everyone to have insurance — so only the sickest and costliest people signed up, driving premiums sky-high. The federal and state insurance exchanges created by the law have allowed many people both with and without preexisting conditions to get coverage that wouldn’t have been affordable a couple of years ago, in part because the insurance plans sold on these exchanges are required to offer a broad range of benefits, thus ensuring that the costs of medical treatments are spread among everyone within the insurance pool.

But the same law gave employers more leeway in the plans they offer to employees. Starting in 2015, many large employers were issued a fine if they didn’t offer their employees insurance, but they’re only required to offer one plan that covers so-called “essential health benefits” — the full range of treatments and services that all plans sold on exchanges must cover. As noted in an NPR Shots article in 2014, large companies are also allowed to offer what are known as “minimum value plans” that must cover at least 60% of expected medical costs for the average person, but don’t have to cover any specific treatments or services. And until the Department of Health and Human Services stepped in February 2015, many companies were selling or planning to sell plans that didn’t even cover hospital treatments (just doctor visits and outpatient treatments). These so-called “skinny plans” are popular among employers in lower-paying industries such as retailers, chain restaurants, and hotels.

All employees at companies offering “skinny plans” also have access to at least one “non-skinny” plan that covers essential health benefits and whose premiums cost no more than 9.5% of household income. But in these low-paying industries, 9.5% of income feels like too much for most employees, and employers that don’t offer “skinny plans” may lose workers to other employers that do. “Skinny plans” count toward the Affordable Care Act’s mandate to have health insurance, even though the insurance that they offer is, by all accounts, skimpy. Many health experts worry that when an illness or accident strikes — the very outcomes that insurance is designed to protect against — people with “skinny plans” will find themselves in a financial hole.

What’s your view on employer-provided health insurance — should “skinny plans” that offer skimpy coverage be allowed, or do plans like this just give people a false sense of security? If you or someone you know has a “skinny plan” from a large employer, how has it been working out? Should large employers be required to offer insurance to their employees at all, or would it be better for everyone to buy individual or family insurance on the exchanges established by the Affordable Care Act? Leave a comment below!

Originally Published March 11, 2015

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