“The good news is that these plans will be a thing of the past in 2014,” Steve Larsen, then a high-ranking Department of Health and Human Services official, told reporters two years ago.
The law bars “mini-med” plans, which cap annual benefits at, say, $2,000 — even though the average hospital stay costs $14,000 — and were commonly offered to employees by restaurant chains and retailers.
But now a new type of bare-bones policy may take their place.
Consumer advocates, employers and insurers say that unless regulators move to block them at the last minute, plans with limited benefits will proliferate, especially for low-paid workers, because of how the law and the regulations are worded.
Proposed and final rules issued this spring surprised many by failing to bar large employers from offering insurance policies that could exclude benefits such as hospitalization. Offering bare-bones policies may result in some fines, but that expense could be less than the cost of offering traditional medical coverage.
For large employers, “the feds imposed no minimum standard on how skimpy that coverage can be other than to say, in essence, it’s got to be more robust than a dental plan or a vision plan,” said Ed Fensholt, a senior vice president at insurance broker Lockton Cos. “We had customers looking at offering some relatively inexpensive and skimpy plan designs to satisfy the individual mandate at a modest cost [to employees] — and to employers as well.”
“There is a lot of interest” from retailers and others that have offered limited-benefit, or mini-med, coverage in the past, said Joan Smyth, a partner at benefits consultant Mercer. She’s gotten so many inquiries since the Wall Street Journal reported on the issue in May that limited-benefit plans are “my favorite topic,” she joked.
Officials for McDonald’s, Ruby Tuesday, Darden Restaurants and other large employers that have offered limited- benefit coverage in the past declined to comment or did not respond to questions about their plans. Mini-med policies were typically offered because some coverage was seen as better than none — and the premium costs were far lower than for traditional coverage. This summer, the Obama administration gave businesses with 50 or more employees another year, until 2015, to comply with the requirement that they offer insurance or pay a fine.
“I think you will continue to see employers in many industries look to carefully calculate their strategy for compliance” by considering limited- benefit plans, said Neil Trautwein, employee benefits lawyer at the National Retail Federation. “As always, the interest is to limit cost increases.”