Skinny plans are low cost, bare minimum coverage health plans.
Health insurers are still convalescing eight years after the passage of the Affordable Care Act. The newest health offering in reaction to the bill is known as the skinny plan, a bare bones preventive plan that entices health insurance consumers with low prices.
Skinny plans, also known as Minimum Essential Coverage, are the most stripped down plans. Generally preventative, skinny plans may cover doctor visits, lab tests, low-cost prescriptions, prenatal exams and some cancer screenings. Items not typically covered may include emergency care, expensive prescriptions, hospital stays, diagnostic tests and surgical procedures.
Where skinny plans are starved for coverage, their allure is on the price tag. Skinny plans range from $50-100 per month. For young, healthy, low wage employees, a low cost skinny plan looks appetizing.
Whether skinny plans meet the legal threshold for “Qualified Coverage” as mandated by the ACA will continue to be a subject for debate as the plans increase in popularity. Qualified Coverage is defined as a plan that’s certified by the Health Insurance Marketplace, provides essential health benefits, follows established limits on cost-sharing (deductibles, copayments and out-of-pocket maximum amounts) and meets other requirements under the Affordable Care Act.
One of those requirements is 60% Actuarial Value. The Actuarial Value is the percentage of total allowed costs paid by the plan, as opposed to the percentage paid by the participant.
There are two tiers of tax penalties for employers with respect to providing health insurance. If an employer forgos providing insurance altogether, they face penalties of $2000 per employee. If an employer provides skinny plans that do not provide 60% Actuarial Value, they face lesser penalties of $3000 per employee, but only in the event they go to the state health exchange. Unless employees flock to the state exchanges in droves, employers and insurers are incentivized to offer skinny plans.
What Agents Should Know
Many employees will choose the skinny plan based on its low price without understanding the benefits. The key for agents offering skinny plans, or Minimum Essential Coverage, is transparency for customers, clearly explaining the high risks involved.