Initially Skinny Plans were designed as a strategy to keep Applicable Large Employers with 50 or more full-time employees (or their equivalent) off the strong penalty and avoid costs of offering a Qualified Healthcare Plan (QHP) to their full-time employees. The objective was to offer a barebones coverage plan and only risk the weak penalty if a full-time employee goes to an exchange and qualifies for a subsidy. However, it seems as if this plan may backfire.
According to the newly released summary from the Department of Health and Human Services (HHS) on Wednesday September 25, 2013, premiums on the individual exchange will be 16 percent lower (before tax credits) than previously projected. For Texas, a 27 year old with an average income of $25,000 could pay as little as $139 (before tax credits) for the lowest Bronze plan QHP. As an employer, this information is crucial to the type of health care plan you decide to offer to your full-time employees. Especially for employers who were betting on a Skinny Plan to keep them away from high penalties.
In any case, dealing with the Affordable Care Act (ACA), all decisions are subject to your particular business. For instance, if your industry has a predominately educated and skilled workforce, then you will have a hard time convincing your full-time employees to pay $120 for a Skinny Plan when a QHP can be purchased on the individual exchange with more coverage for close to the same price. The individual premium could even be less if the employee qualifies for a subsidy.
Qualifies for a subsidy is the trigger. Penalties will begin to largely accumulate for employers that have a majority of full-time employees reject the Skinny Plan offer, go to an exchange to purchase a QHP, and qualify for a subsidy. This is when the plan that was designed to keep an employer away from high penalties backfires.
The cost of offering a QHP may be high, but it could be a better alternative than risking a large amount of your employees qualifying for subsidies on the exchange. However, depending on the size of your workforce and other stipulations, a Skinny Plan may still be an option for your business. To discuss options for your particular business, give us a call and stay updated on the employer mandate by reading our weekly blogs on the ACA.