With the Affordable Care Act prohibiting annual limits on medical benefits, mini-med plans have met their demise. Many employers looking for a replacement are asking benefit advisers about another option the skinny plan.
Since its inception, the ACA has worked to phase out caps placed on the annual dollar amount of benefits an insurance company will pay per covered individual or family; and in 2014, annual dollar limits of any kind have become prohibited altogether, bringing an end to the so-called mini-med plan.
This bare-bones medical benefit, popular with service industry employers such as fast-food chains and staffing agencies, offered a basic policy in which employees paid a low monthly premium in exchange for a fixed amount of benefits per year usually only a few thousand dollars. The plan covered any medical expenses up to that fixed amount, but the insured individual or family was responsible for all additional expenses incurred.
While the plans were oft-criticized by many in the benefits industry as little better than having no insurance, the uncomplicated plans served a purpose, according to Alden Bianchi, practice group leader of Mintz Levins employee benefits and executive compensation practice. Used mostly as an employee attraction and retention tool for employers with high-turnover workforces, the mini-med offered low-wage employees some help with medical care costs, with little cost to the employer, he says.
Benefit advisers looking to help their employer clients replace these now defunct plans need to understand the purpose they served, Bianchi says, and overcome a new skepticism for the controversial skinny plan gaining traction in mini-meds absence.
These minimum essential coverage plans cover only preventative services as mandated by the ACAs minimum essential coverage rule.
Starting in 2015, companies with 100 or more full-time workers must offer insurance plans that provide minimum essential coverage or face a penalty of $2,000 per employee. Other rules penalize companies for only offering plans that are too skimpy or too costly, but some employers are leveraging the penalties for offering skimpy plans as opposed to the cost of offering minimum value plans to all of its employees.
In some respects, skinny plans are the new mini-med plans, Bianchi says.
In the past year, skinny plans have gained some grudging acceptance, Bianchi says, adding that advisers should try to separate any opinions they may have of the product with its legal efficacy. He adds: Advisers need to find the value these plans can offer their clients, particularly for those that used to offer mini-med plans.
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Bianchi says thus far hes seen skinny plans used as an insurance policy for an employer that chooses to apply the look-back measurement method for determining an employees status as full-time, but is worried it may not be properly identifying variable hour employees in all cases. In this situation, he says, the employer will offer a major medical plan to all, or almost all, of the employees it determines to be full-time and also offer the skinny plan to all employees. That way, if an employee is determined to be variable hour, he or she still has an offer of coverage under the skinny plan.
Still other employers appear to be leaning toward a strategy that calls for offering both a major medical plan and a skinny plan up front to all employees. This permits employees to purchase just the skinny plan in order to avoid penalty under the individual mandate.
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