Obamacares January 1st Gift to Big Business: Mandate for Large Employers Kicks In

Obama Administration (once again) re-writes health law without any act of Congress By John C. Goodman Texas Insider Report: AUSTIN Texas  Have you ever wondered why the largest companies almost never criticize the Affordable Care Act? That may be because they are getting a deal that the rest of us arent getting. And there is one more surprise. In a nutshell the largest firms can offer the skimpiest plans.   The mandate to provide health insurance to employees kicks in for large employers on January 1st and applies to smaller companies the following year. Surprisingly firms that are large enough to self-insure (and pay employees medical expenses directly) can satisfy the mandate without covering hospitalization. They can avoid paying for the services of specialist doctors mental health care and even emergency room visits. Perhaps aware of the embarrassing implications of these loopholes the Obama administration made an election eve announcement that there would be limits on the ability of firms to exploit them going forward. On Election Day a Treasury Department notice alerted employers that any health plans not already finalized will have to cover hospitalization and doctor services but not other benefits that are required of small-employer plans and plans purchased by individuals. The timing of these announcements suggests that the administration wanted absolutely no media attention for them. Who is going to pore over changes to Obamacare technicalities when exciting election results are coming in? There are two issues here that the administration doesnt want discussed:

1. Why does the law have a huge gaping loophole for the largest companies?
2. And how is the Obama Administration able (once again) to re-write the law without any act of Congress?

If you work for a self-insured company and have an above-average income you probably dont have much to worry about. Employers are going to provide higher-income employees reasonably good health insurance in the future just as they have in the past. But if your income is below-average you could end up with worse coverage than you had before.

In general employers will be required to provide health insurance that covers ten essential health benefits." These include hospitalization ER visits etc. However (and the law is clear on this) self-insured companies can avoid offering these benefits so long as they meet a minimum actuarial value" test. That means the employer plan must cover at least 60 of expected health care costs.

One way for employers to make sure they are meeting that requirement is to get a passing score on the Department of Health & Human Services minimum-value" calculator an online tool. At the site the visitor is invited to check boxes indicating whether certain benefits are included in the employer plan. Further the employer can actually meet this test without including hospitalization. Mental health care MRI and CT scans ER visits and specialist services are other essential health benefits" that do not have to be included.

There is one more surprise. Once the employer offers compliant insurance the employee is ineligible for subsidized insurance that does cover these services in the (Obamacare) health insurance exchange.

There are some other loopholes employers are exploiting:

1. Whether or not they are self-insured all employers can charge the employee a premium equal to 9.5 of annual wages for the employees coverage and 100 of the cost of dependent coverage.
2. Employees earning $30000 a year for example can be required to pay $2850 for their own coverage. If a family plan costs $15000 the employee can be asked to pay $12150 in premiums (more than one-third of the employees income).
3. Under the law these plans are considered affordable." If the employees turn down the offer they and their families are ineligible for subsidized insurance in the health insurance exchange. Had they never received the employer offer a $30000-a-year family would be entitled to insurance more than 90 subsidized by the federal government.

In general employers who fail to offer affordable insurance to their employees will face a $2000 fine for each employee. However self-insured employers have another option. As long as they offer insurance with minimum essential coverage (which mainly means preventive care with no cost sharing and no lifetime caps) they can escape the $2000 fine. The remaining benefits can be quite skimpy. However since such a plan does not meet the minimum value test the employer will be liable for a $3000 fine if any employee goes to the exchange and gets subsidized health insurance. Paying the fine may actually be to the employers advantage however. Any employee who goes to the exchange to buy more generous coverage is likely to be an employee with a serious health problem. The $3000 fine may be a bargain compared to the cost of treating the illness. One way to escape all fines and minimize costs is to offer employees a skimpy (non-compliant) plan but give them the opportunity to upgrade to a fully compliant plan in return for a premium that equals 9.5 of their income for individual coverage and 100 of the cost of dependent coverage. Low-income employees are highly likely to turn this offer down especially if they are healthy. And having turned it down they forfeit the right to get subsidized insurance in the exchange. In all these cases whats good for the employer is bad for the employee and vice versa. John C. Goodman is a Senior Fellow at the Independent Institute and author of the award-winning and widely acclaimed Institute book Priceless: Curing the Healthcare Crisis. The Wall Street Journal and the National Journal among other media have called him the Father of Health Savings Accounts."