Skinny Plans: A Viable Option for Some Large Employers?
By Josie Martinez, Senior Partner and Legal Counsel
EBS Capstone, A UBA Partner Firm
As the implications of health care reform become more and more apparent, large employers are increasingly grappling with coverage options in order to avoid the penalties. Over the past few months, there has been considerably more attention paid to the problems faced by the staffing industry and similar employers since the temporary employees and variable hour employees are generally common law employees of the organization, and ultimately such companies are on the hook as it relates to offering health coverage.
One option some employers are looking at is the offer of a "no-minimum value plan" - this is a group health plan that provides medical care but may not satisfy the 60 percent minimum value threshold. Granted, if an employer offers such a plan that is not minimum value, an employee may apply for a tax credit at the exchange and this could trigger a $3,000 penalty ($3,000 for any full-time employee that receives a tax credit), but this penalty would be much less than the penalty associated with not offering any health plan at all (the $2,000 penalty/every full-time employee).
These types of plans are starting to make their way into the market for just this reason - as a viable alternative to staffing companies and/or other companies that operate in a similar fashion. At the end of the day, it allows employers to satisfy the coverage requirement under PPACA and avoid the hefty penalty associated with that option. So, it minimizes the risk financially. Also, if employees accept the "skinny" plan, they will not be penalized with the individual tax penalty come Jan. 1, 2014 for not having coverage -- in some respects, a win-win for both parties.
Keep in mind, this strategy is aggressive. There are those who may argue such plans will not provide sufficient coverage to satisfy the "minimum essential" coverage criteria, but for now, it seems a possibility. Eventually, these plans may not pass muster, but for now there is nothing definitive against going this route so it is something to consider.