An even scarier type of health insurance plan

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March 18, 2015 by Tony Novak

The death of traditional employer-sponsored health plans

It is scary that the fundamental way that we’ve provided health insurance to the majority of Americans for many decades is now suddenly obsolete under the provisions of the Affordable Care Act. A range of recently published comments in insurance industry publications predict that employer-sponsored health insurance will disappear sooner than we’ve anticipated. In conjunction with this change in norm, I’ve published a series of articles here and elsewhere suggesting that employers are far better off providing supplemental insurance than primary medical insurance.

“Fatter” skinny health plans”

But recently an even scarier proposition has been in the news: the rebirth of “skinny” medical plans that formerly were used as “minimum value plans”. IRS squashed the original strategy last year. Now promoters suggest boosting the benefits so that they meet the law’s required minimum value threshold to expand the strategy.

The worst case

While I am not in a position to comment on any specific plan, I think that it is easy to see that the worst case outcome would be a health plan that leaves a large unmanageable deducible, a shortage of catastrophic benefits and then causes the employees to be ineligible to opt out and enroll in a regular insurance plan through the state insurance exchange.

The best available option

Under current law, the best option for most employers is to drop major medical insurance, allow employees to purchase catastrophic coverage through the exchange and then have the employer provide supplemental insurance coverage for the first $5,000 to $10,000 of medical costs.

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