Companies review health plans

The Wall Street Journal had an interesting and important piece on how employers, especially those with lower-earning workforces, are looking to provide coverage in order to comply with the Affordable Care Act.

Here are some of the details of what companies are considering:

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital

Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.

But the story goes on to say that the plans may not actually be in full compliance with the new coverage laws:

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs. Many employers, particularly in low-wage industries, worry about whether they—or their workers—can afford it.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. report. Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.

These types of plans are just one strategy companies are looking to in order to avoid penalties associated with the new laws and to save costs:

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., Aetna Inc. and Humana Inc., are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don’t need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Insurers and health-benefits administrators are also offering small companies a chance to switch to self-insurance, a form of coverage traditionally used by bigger employers that will face fewer changes under the law. Employers are also considering limiting workers’ hours to avoid the coverage requirements that apply only to full-time employees.

The Washington Post also had a story Monday about how individuals might be able to reduce their out-of-pocket costs when covered by high-deductible health plans:

There is no free lunch. As more people buy high-deductible health plans, they’re discovering that while premiums for such plans are more affordable, the trade-off can be high out-of-pocket costs before coverage kicks in.

However, some plans sold on the individual market offer a way for healthy people to shrink their deductibles. Under so-called deductible-credit plans, the deductible diminishes year by year for policyholders who don’t spend a lot on health care.

Supporters say these programs reward good health by helping customers reduce their costs. But consumer advocates say the programs may discriminate against sick people and run afoul of the Affordable Care Act.

In a plan with a deductible credit, if an enrollee’s health claims don’t exceed the deductible one year, the deductible drops by 20 percent the following year, then by the same amount the following year, until the deductible may eventually be reduced by half, the maximum reduction allowed.

So if someone has a plan with a $5,000 deductible, for example, the deductible could be reduced to $4,000 after the first year. The following year, it could drop another $1,000; after three years, it could be cut to $2,500. If at that point the policyholder had, say, a car accident with claims totaling $10,000, the person would receive credit for the $2,500 reduction and owe less out of pocket. The following year, the deductible would reset to the original $5,000 and the process would start all over again.

It’s obvious that in the search to save money, many people, especially those earning lower salaries are going to have trouble paying for health care. If you have a plan where visiting a hospital isn’t possible, or paying for it out-of-pocket could cost all of your income, then getting the care you need becomes a struggle.

The unintended consequences of the Affordable Care Act may end up hurting those who most need it. Continuing to cover what insurance companies will offer and how different companies choose to comply with the law will be a big story. Let’s just hope that the business press remains vigilant on the topic, putting out thorough pieces like these.