Starving employees with ‘skinny’ plans

By Allen Greenberg


Have you heard about these so-called skinny plans?

In simplest terms, they’re bare-bones health plans some employers apparently are considering that include preventive services but are missing much of anything else. No hospital stays, no surgery, X-rays or prenatal care.

The beauty of these limited plans is that they could help employers avoid penalties under the Patient Protection and Affordable Care Act.

My first reaction to these plans? Wow, who would want to work for a company with such sucky benefits?

But then I began to think about the millions of restaurant and retail workers – among others – who often labor for years without a shred of health care coverage.

So then I thought, wow, who would want to work for a company with such sucky benefits?

The answer, of course, is only someone without the ability to choose, someone without the skills to compete in today’s workplace, someone stuck in a job they’d love to leave.

The Wall Street Journal, in an article in late May, said such plans would be available at $40 to $100 per month per employee. As we all know, under Obamacare, employers that offer no insurance face a possible penalty of $2,000 per full-time worker per year starting next year if at least one of their employees receives a government subsidy to buy a more-robust healthcare plan at a state exchange.

So going the “skinny” route could help employers save money by providing coverage that would cost far less than paying the fines.

But they'd still have to pay a lower penalty for offering plans that do not provide “minimum essential coverage.” That would cost them just $3,000 a year for each full-time worker who receives a subsidy rather than $2,000 for all workers under the first scenario.

Before we get any further, let me acknowledge that this strategy is obviously big news for a lot of employers that have never before offered health benefits to their workers.

Not only can they avoid some of the law's heftier penalties, they can try to lure workers by offering them a health plan, even one that would be viewed as a joke by most folks.

The people behind the PPACA sounded incredibly naïve when asked for their views on these skinny plans.

“We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” Robert Kocher, a former White House health adviser who helped shepherd the law, told the Wall Street Journal. “Our expectation was that employers would offer high quality insurance.”

Well, my apologies to Mr. Kocher, but that’s a fairly stunning remark that reflects zero understanding of how business works.

That said, employers that try to pass off bare-bones coverage as real health plans without smirking are kidding themselves.

Here are two predictions about all of this:

First, regulators (and a lot of self-respecting brokers) aren’t likely to view skinny plans as anything but a sleazy tactic that will draw plenty of scrutiny, raise eyebrows and evoke guffaws. Employers that go this route would be smart to have a Plan B ready.

Second, any employers that adopt the bare-bones approach and expect some kind of morale boost at the jobsite are deluding themselves. You'll save money but offering workers a garbage benefit package is not going to lower your churn rate, boost productivity, build loyalty or in any way help you become a place where people will want to work.

Skinny coverage. Bare-bones coverage. De minimis coverage. Call it what you want. Employees will flee into the arms of companies that offer the best coverage. That's the market reality.

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