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Employers offering “mini-med” plans are examining their options for when the low-cost plans no longer meet federal health care reform law requirements.
Several million employees and their dependents are enrolled in the plans that offer limited coverage. Common in the retail, service and hospitality industries, the plans often are offered to low-wage, part-time and seasonal employees.
While mini-med plans cap health care expenses they will cover in a year, often $25,000 to $50,000, the Patient Protection and Affordable Care Act bans annual dollar limits on coverage starting in 2014.
“Clients of ours are preparing for the worst,” said Pat Haraden, a principal at Longfellow Benefits in Boston. “Once you remove the limit on the benefit, it's hard to price a plan that will be affordable.”
One strategy is reducing employees' hours to less than 30 hours a week, which is less than full time. That would exempt employers from the $2,000 per employee penalty if they do not offer coverage or the $3,000 penalty if they offer health insurance that is considered “unaffordable” because the employee's premium for self-only coverage exceeds 9.5% of wages, qualifying the employee for a federal premium subsidy.
Making employees ineligible for an unaffordable employer plan by cutting their hours to less than 30 a week “would be helping them,” Mr. Haraden said.
“Sometimes it's in the employees' best interest to set up a plan so that the lowest-paid employee can go to the exchange,” said Mike Thompson, a principal in PricewaterhouseCoopers L.L.P.'s human resource services practice in New York. “Employers are now determining what can we afford to provide and what would employees be subsidized in the exchange.”
“Employers are going to be thinking through what their workforce is going to look like — whether to transition more employees to part-time and let them buy coverage through the exchanges,” said Christopher Covill, benefits product solution leader at Mercer L.L.C. in Atlanta.
But employers have to ask, “How does that affect my ability to run my business on a day-to-day basis?” said Karen Vines, vice president of benefits, governance and compliance at IMA Benefits in Wichita, Kan.
For example, Appearance Group Inc., a Wichita-based company that cleans and details corporate jets, will not cut the hours of its 80 full-time employees to make them part-time, said President Matthew Henry. Instead, it will upgrade its plan for full-time employees and ensure that it meets affordability criteria.
“Low turnover is a key to my business because of the liability of what we're working with,” Mr. Henry said. “It's in our best interest to have skilled technicians. I know other industries are cutting back to under 30 hours exclusively, but I don't believe it's right for our company.”
Appearance Group has 30 part-time employees who are offered limited indemnity plans. In the future, those employees may choose to purchase coverage through an exchange, he said.
Limited indemnity plans are different than mini-med health plans, but they often are lumped together (see related story).
Sherri Bockhorst, a principal in Buck Consultants L.L.C.'s health and productivity practice in St. Louis, said for part-time employees, none of her retail clients “has made a firm decision on what to offer that population on Jan. 1. My clients want to do the right thing and are struggling with this.”
To replace mini-med plans, employers are considering voluntary products such as hospital indemnity, although those would not meet the PPACA standard. The challenge then becomes communicating that employees still need to get coverage through the exchange, she said.
“One client is thinking of implementing an advocacy service that could talk to employees about their options,” Ms. Bockhorst said.
Employers will consider either replacing mini-med plans “with something that is close, or alternatively looking at the ($3,000) penalty” for not offering affordable coverage, said Jonathan Alexander, compliance counsel for Western Growers Association in Irvine, Calif. “My employees might be more unhappy with me, but they can go to the exchange.”
However, he said, “it's different for agriculture.” In California, 60% to 70% of the 450,000 seasonal workers are undocumented and can't access an exchange currently, he said.
“There's a window of opportunity for change now,” said a spokeswoman for the association. With immigration reform, undocumented workers could access an exchange, she said.
“Some of this is going to have to wait for finalization of the essential health care benefits rule, probably by the end of the first quarter of 2013,” said Neil Trautwein, vice president and employee benefits policy counsel at the National Retail Federation in Washington. “A few parameters have changed with PPACA, but we're still dealing with what levels of benefits and wages” are needed to attract a diverse workforce, he said.
Despite increased costs and opposition to the health care reform law, the overwhelming majority of employers intend to keep providing health care coverage for their employees, according to a Business Insurance survey.