Closing what many see as a loophole that could trap millions of people in substandard insurance, the Obama administration said Tuesday that large-employer medical plans lacking hospital coverage will not qualify under the Affordable Care Act’s toughest standard. It also offered relief to workers who may be enrolled in those plans next year.
The administration will rule that plans without “substantial coverage for in-patient hospitalization services” do not meet the law’s “minimum value” threshold, the Treasury Department said in a notice Tuesday morning. It will issue final regulations saying so next year, it said.
“It’s good news for employees,” said Sabrina Corlette, project director at Georgetown University’s Center on Health Insurance Reforms. “They shouldn’t be stuck with subpar coverage.”
Hundreds of employers with low-wage workers, such as retailers and temporary-staffing companies, have been preparing to offer such plans for 2015, the first year large companies are liable for fines if they do not provide minimum coverage.
Large companies are not required to offer the health law’s “essential health benefits,” including hospital services (unlike the insurance sold to individuals and small employers). But most analysts assumed that the minimum value calculator — testing whether insurance pays at least 60 percent of expected medical costs for a given plan — would require hospital care. It didn’t.
Although the insurance costs half as much as similar coverage including hospitalization, an online calculator published by the Department of Health and Human Services certifies it as passing the law’s minimum-value standard, Kaiser Health News and The Washington Post reported two months ago. Many see the calculator as flawed.
Numerous large employers have already committed to such coverage for next year, brokers say. Some have enrolled workers for insurance that began in October.
Responding to industry pleas, the administration agreed to allow those plans for a year if employers committed to them before Tuesday, Nov. 4. But officials also moved to give their workers an affordable alternative, granting an exception to the rule that would have barred them from premium subsidies if they opted instead to buy insurance on the health law’s online marketplaces.
Under the health law, employees who are offered minimum-value coverage at work are ineligible for federal tax credits in online insurance marketplaces. “In no event” will workers given an employer plan without hospital coverage be disqualified from the subsidies, the Treasury said Tuesday.
“It’s a very positive, constructive, sensible step,” said Edward Lenz, senior counsel for the American Staffing Association, a trade group for temp and recruiting companies. “The key is that everybody’s going to be held harmless” — companies that have committed to the plans as well as workers wanting to buy their own, subsidized insurance with broader coverage.
About half of the association’s 1,600 members, who employ 3 million people on any given day, had committed to offer or were considering calculator-tested plans without hospital coverage, Lenz said.