When the “employer mandate” under the Affordable Care Act (ACA) becomes effective on January 1, 2015, employers who have 50 or more employees will be required to offer health insurance coverage to their workers, or pay a penalty if they do not do so. Some employers have been quietly considering the potential use of plans covering only limited benefits to comply with the employer mandate.
It is not universally recognized that in the ACA, the definition of “minimum essential coverage” (“MEC”), which large employers must provide to their employees, does not align with the definition of “essential health benefits” which individuals’ plans must cover. Under the law and regulations as currently written, MEC need not be as comprehensive as the array of “essential benefits” that will be required in plans sold directly to small businesses and individuals. While it is clear that the definition of MEC does not include coverage providing only non-medical benefits, such as coverage only for vision care or dental care, all “employer-sponsored coverage” (including COBRA coverage and retiree coverage) that provides broad health benefits will generally meet the MEC requirement.
This creates the possibility that an employer might be able to comply with the employer mandate by offering a “skinny” health plan that covers only preventive care. Since it is anticipated that many employees in that scenario would want additional basic coverage, a low-cost limited medical benefit plan that is not intended to comply with the ACA could be offered as a supplement. An employer that implements this strategy would not be subject to the penalty for not providing insurance to its employees; however, another type of per-employee penalty could be imposed on the employer if its low-earning employees were to opt out of the employer-provided coverage and seek subsidized, more comprehensive policies in the state healthcare “marketplaces,” or exchanges.
It should be noted, however, that the potential use of “skinny plans” to meet MEC is a fairly new concept, and it remains possible that the use of such plans will draw regulatory scrutiny or be determined to violate other legal requirements. Additionally, it is possible that the MEC definition may be revised in the future to line up more precisely with the definition of “essential health benefits,” thereby requiring employers to offer more robust coverage (or pay the per-employee penalty for not doing so).