Some employers are building health insurance policies that are
technically compliant with the healthcare reform law, yet don't include
coverage of inpatient hospital services. Backers of such plans contend that
some coverage is better than none, especially for workers in business sectors
that traditionally haven't offered their employees health insurance. But
hospital groups have slammed the so-called “skinny plans,” saying they almost
certainly will be blocked by regulators.
“I think there will be a consumer and employee revolt if employers
chose to avoid the spirit, if not the letter, of health reform by skinnying
down benefits,” said Chip Kahn, CEO of the Federation of American Hospitals, an
association that represents for-profit hospitals. “I can't even envision this
administration allowing these plans to move forward under their regulatory
umbrella.”
At issue is a strategy that some employers are using to avoid paying
penalties under the Patient Protection and Affordable Care Act. Starting next
year, companies with at least 50 full-time employees have to offer affordable,
valuable coverage to their workers or face a fine. Kaiser Health News first
reported that some companies can avoid those penalties by constructing health
plans that exclude hospital benefits. Employers have the ability to build
ACA-compliant plans through a calculator spreadsheet, which makes almost any
medical benefit optional, as long as plans have equivalent actuarial value to
bronze plans sold on the exchanges.
Large companies that self-fund their health insurance are not required
by the law to offer the 10 essential health benefits, which include inpatient
services, but there is an annual cap on an employee's out-of-pocket costs. For
2015, that limit is $6,850. Still, some employees next year could receive a
bare-bones health plan that only covers outpatient services like doctor visits.
“It wasn't an intention of the actuaries who designed this to carve out
hospitalization,” said Anne Lennan, president of the Society of Professional
Benefit Administrators, which represents third parties who help employers
create health plans. “They were just being good health actuaries adhering to
the law.”
Health benefit advisers said most of the companies experimenting with
these types of plans—such as restaurants, nursing homes, convenience stores and
dairy farms—have never offered health insurance before, and they usually employ
low-wage workers. Additionally, skinny plans could be paired with hospital
indemnity plans, though that would add costs for employees.
Some health economists are perplexed that such an option exists in the
federal calculator methodology (PDF). “From the perspective of the economics of
risk and insurance, a plan that generously covers outpatient care and
completely excludes inpatient care is flat-out nuts,” said Richard Hirth, a
health policy and management professor at the University of Michigan's School
of Public Health, in an e-mail.
“What insurance should cover first is the low-probability, high-cost
events,” Hirth said. “These plans are like buying homeowners insurance that
covers broken windows from the first dollar but excludes coverage for your
house burning down.”
Danny Chun, a spokesman for the Illinois Hospital Association, said the
option to build a health plan without covering inpatient care is a
“significant” flaw. Joe Fifer, CEO of the Healthcare Financial Management
Association, a membership group for hospital finance executives, agreed.
“It just seems terrible for both hospitals and employees,” Fifer said.
“It calls into question: 'What's the purpose of insurance if it doesn't cover
catastrophic situations?'”
However, Kevin Schlotman, director of employee benefits at health
brokerage Benovation, said the government clearly made inpatient services an
optional benefit for self-funded plans since the box on the calculator could be
unchecked.
“I've seen people portraying it as a glitch or an error. I don't see it
as that,” Schlotman said. “Logically, it shouldn't have been an option to
remove.”
Physicians and outpatient centers would stand to benefit from these
plans, said Jim Smith, senior vice president at healthcare consultancy The
Camden Group. Patients, assuming they know the full scope of their health plan,
would avoid hospitalization at all costs, thus increasing visits to outpatient
providers.
But for hospitals, treating a patient with this type of skinny plan has
severe financial ramifications, the industry says. Those patients essentially
would be on par with the uninsured, which would force hospitals to resort to their
charity-care policies and write off debt that would be difficult if not
impossible to collect.
“Are (hospitals) going be criticized for collecting on those patients?”
Fifer said.
Benefit advisers believe the plans would only represent a small slice of
the employer-sponsored market, and many companies view the policies as bridges
to more comprehensive health insurance. “Is (the coverage) great? No,”
Schlotman said. “I think most of the employers I'm speaking with are seeing it
as a stepping stone.”
It's unclear what the government will ultimately do with the plans. HHS
and the Treasury Department did not respond to requests for comment. However,
FAH's Kahn said he is “convinced” the feds will adjust the calculator so that
all health insurance policies include inpatient care.
“Anybody's definition of health insurance that doesn't include hospital
coverage is just not health insurance,” Kahn said.
CMS offer insurers fall-back plan for subsidies
Health insurers will have the ability to ax contracts with federally
run exchanges if the ACA's premium subsidies are eventually invalidated by the
courts, reports Inside Health Policy. The CMS sent agreements with the opt-out
clause last week, but insurers will still have to comply with state coverage
laws.
The language of the ACA's tax credits, which help lower monthly premium
costs for people buying exchange plans, have been hotly contested in federal
district and appellate courts. This summer, a three-judge panel at the District
of Columbia U.S. Circuit Court of Appeals said the subsidies could not be
granted to people who buy insurance on exchanges run by the federal government,
while the 4th U.S. Circuit Court of Appeals concluded the opposite. However,
the D.C. Circuit will rehear its case en banc in December. Most recently, to
the delight of conservatives, an Oklahoma judge ruled the premium subsidies
were illegal. Legal experts have said it would be out of the norm if the
Supreme Court took up the case before the D.C. Circuit issues its new ruling.
If the courts do rule against the subsidies, premiums in the individual
market would likely skyrocket, while enrollment would drop, according to a
recent RAND Corp. report.
Americans lack health insurance literacy
A new study from the American Institutes for Research (PDF) finds that
Americans don't know as much about health insurance as they might think. Of 828
surveyed people, more than half said they had the confidence to effectively
choose and use a health plan. But respondents only correctly knew, on average,
60% of common health insurance terms and concepts. About 50% knew the basics of
an HMO, and only 23% were able to explain key characteristics of a
preferred-provider organization. Additionally, only 20% knew their cost-sharing
amount for an in-network doctor visit.
Follow Bob Herman on Twitter: @MHbherman
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