Obama Administration Disallows Plans Without Hospital Coverage
By Jay Hancock
February 23, 2015 - Kaiser Health News
The Obama administration has blocked health plans without hospital benefits
that many large employers argued fulfilled their obligations under the
Affordable Care Act.
Companies with millions of workers, mainly in lower-wage industries such as
staffing, retailing, restaurants and hotels that had not offered health coverage
previously, had been flocking toward such insurance for 2015.
Plans lacking substantial coverage of hospital and physician services do not
qualify as gminimum valueh coverage under the law and so do not shield employers
from fines of $3,000 or more per worker, the Department of Health and Human
Services said late Friday.
The move closes what many saw as a surprising loophole,
first
reported by Kaiser Health News in September, that let companies bypass the
health lawfs strictest standard for large-employer coverage while at the same
time stranding workers in sub-par insurance. Employees offered such plans would
have been ineligible for tax credits to buy more comprehensive coverage in the
lawfs online marketplaces.
The agency did decide to allow such plans for this year only if employers had
signed contracts by Nov. 4.
However, it also granted relief to workers offered such coverage, saying they
may receive tax credits according to their income to buy more comprehensive
insurance in the online exchanges. Ordinarily, employees offered coverage
qualifying as minimum value arenft eligible for the subsidies.
Despite what Washington and Lee University law professor Timothy Jost called
ga lot of pushbackh from employers, HHS has now followed through on earlier
guidance that it intended to disallow such coverage.
A plan without hospital benefits gis not a health plan in any meaningful
sense,h the agency said in a large
batch of regulations issued Friday. Scoring such a plan as minimum
value gwould adversely affect employees (particularly those with significant
health risks) who understandably would find this coverage unacceptable. ch
The ruling ends a debate that erupted last summer over HHSf official, online
calculator for determining minimum value in a large-employer plan.
The Affordable Care Act does not specify gessential health benefitsh in
large-employer plans, such as hospitalization and drugs, as it does for
individual and small-business insurance. Instead, the minimum-value test
requires large companies to cover at least 60 percent of expected medical
costs.
One way to certify a plan as minimum value is to plug its components —
benefits, deductibles and so forth — into the official calculator. Many were
shocked to learn that the calculator gave passing scores to plans with no
inpatient hospital coverage.
Now HHS is saying: Ignore the calculator. Large-employer plans must pay for
substantial amounts of hospital care no matter what.
gWhat remains a mystery is whether the calculator was at fault,h Alden
Bianchi, a lawyer who advises many companies that were considering such plans
for 2015, said via email. gThe regulators donft say. Rather, they take the
[position] (not unreasonable or nutty, in my view at least) that a plan with
these services is not real health insurance.h
Even with its allowance for companies that had signed contracts by Nov. 4,
HHS stopped short of employer pleas for more flexibility. Industry groups wanted
a green light to temporarily offer plans without hospital benefits if companies
had made substantial preparations to do so but hadnft signed a deal.
Itfs unclear how many firms will offer such coverage for 2015. Nearly half of
the 1,600 employer members of the American Staffing Association, which employ 3
million temporary employees on any given day, had committed to offer or were
considering the plans last fall before KHN reported that regulators were moving
against them.
While some members followed through and adopted such coverage, most did not,
said Edward Lenz, senior counsel for the association, a trade group of temp and
recruiting firms.
Calculator-approved plans lacking hospital benefits are comparatively rich in
outpatient services such as doctor visits. Consultants selling the coverage had
argued it was a good first step for lower-wage, high-turnover employers that had
never offered major-medical insurance.
gIfve had a couple discussions in the last several days with clients who were
interested but disappointed they were too late to install them for 2015,h said
Edward Fensholt, a benefits lawyer with brokers Lockton Companies. Other
companies gleapt on them,h he said.
For employers that planned to offer such coverage but hadnft pulled the
trigger by Nov. 4, gthis is very disruptive news,h Bianchi said. gBest I can
recall, I have about a half dozen clients that are in this position.h
Anne Lennan is president of the Society of Professional Benefits
Administrators, whose members process claims for self-insured employers.
gA very small number of non-hospital plans were implemented by my members —
as a percentage of all the plans they administer,h she said via email.