Health care law loophole for large employers eyed
The Obama administration plans to close a loophole in the Affordable Care Act that allows large companies to refuse to cover in-patient hospital stays in any of their health insurance plans, according to an official involved in the internal discussions.
The official requested anonymity until the announcement is made because “the guidance that will be issued is not finalized.”
Health plans for individuals and those working for smaller employers must include coverage within at least 10 categories of “essential health benefits” that include maternity care, prescription drugs and hospitalization. The health care law is much more stringent about what health insurance must cover for these people than it is for those working at large employers.
Washington and Lee University law professor Timothy Jost says the employer health insurance mandate is “not well-designed.” It is a loophole, he says, that large companies “are not required to cover all of the essential health benefits.” To pass the government “minimum value” test, these companies are required to cover only 60 percent of the value of some of the essential benefits, so they “don’t have to necessarily offer every one,” says Jost, a supporter of the law and an author of several health law books.
Plans that cap the number of hospital visits — or offer no hospital coverage at all — could probably pass the ACA’s minimum value test if other coverage is generous enough, says Cori Uccello, senior health fellow with the American Academy of Actuaries.
Even if they didn’t, employers would be allowed to offer these no-hospital-coverage plans, as long as one of their plans meets this “minimum value” test, says health care lawyer Alden Bianchi. Companies with more than 100 employees have to pay a $3,000-per-employee penalty if they don’t offer an affordable health plan next year, and workers who are not insured must pay a penalty as well. Both the company and the employee can avoid the penalties with a plan that does not cover hospitalization or anything other than preventive services such as physicals as long as one is offered.
Many low-wage workers are likely to be attracted by the low premiums these plans offer. Bianchi says he has many temp and contract worker agency clients who are investigating and adopting plans that don’t offer hospital benefits.
The ACA prohibits limits on total health care coverage, but plans can have “visit limits,” says Kevin Lucia, senior research fellow with the Georgetown Health Policy institute.
“Whenever there’s a regulatory structure, there’s going to be some gaming taking place to maximize profit,” says Lucia. “That’s where regulators need to step in — to make sure it isn’t being done to the detriment of what the ACA is trying to do.”
Plans with limited benefits, such as those through associations, or that lack hospital benefits are most attractive to companies that employ low-wage workers who cannot afford the higher premiums that come with plans with higher levels of benefits.