Last week, I gave a brief overview of the concept of “skinny” healthcare plans, a middle-of-the-road option for staffing firms to offer their temps. This week I address the risks those plans pose to staffing firms.
What at one point would have been considered wellness plans, skinny or “Minimum Essential Coverage” plans have to potential to cause great confusion. For example, some employees who accept the employer’s insurance may not fully understand the limited scope of its coverage and believe that it is comprehensive health insurance.
Employers will announce that they are offering employees an ACA-compliant health insurance program. Employees hearing this news will likely assume (as the government and many others have assumed since ACA was passed) that any ACA-compliant plan is required to cover a complete range of catastrophic health care costs, without annual or lifetime limits. Isn’t that one of the main purposes of the law and one of its most frequently cited achievements?
It is perfectly predictable that many employees will think that skinny plans provide traditional comprehensive health insurance, no matter what the official disclosures to them say. A catastrophic health expense would be a cruel way for these employees to learn about the limits of their coverage.
Understanding gap. We have seen this type of situation before, in connection with accidental death insurance. Regular life insurance pays off regardless of the cause of death, with a few exceptions like suicide and war. Accidental death insurance pays only for death caused by carefully and narrowly defined accidents, which are very rare. Consequently, accidental death insurance is so cheap that some banks give away $20,000 policies — instead of toasters — just for opening checking accounts, and some employers provide it as an employee benefit that generates a lot of bang for the buck. Some people with large face amounts of accidental death coverage think that they have regular life insurance, and because of that belief, they neglect to deal with the real harm that their families would suffer from their premature deaths from the most likely causes.
Skinny plans will foster a similar understanding gap. Sponsors of skinny plans should plan to continually explain to their employees in plain language that such plans are not the equivalent of traditional health insurance and that they need to consider obtaining comprehensive catastrophic coverage through state exchanges or elsewhere. Sponsors may feel that directing employees to the exchanges would be counterproductive to their skinny plan strategy, which is designed to save money in proportion to the rate at which employees fail to obtain subsidized coverage from the exchanges. But allowing employees to misunderstand their health coverage could produce serious employee relations issues and conceivably even legal ones.