Is Your Health Insurance Too “Skinny?”

There’s a saying that you can never be too rich or too thin. But thin is not a quality you want in your health insurance. “Skinny” health insurance, also known as bare-bones, low-cost, or “minimum essential coverage”(MEC) plans, describes employer-sponsored group plans that provide non-catastrophic health care such as wellness benefits, preventative care, and other routine medical care.

These plans are legal under the new health care system and exist mostly in low-paying jobs, such as with restaurants and hotels. The plans protect the employer from the $2,000 per employee penalty for not offering any health insurance. But many of the plans do not cover what most of us would consider components of genuine health insurance—basic surgical and hospitalization costs, especially for true emergencies like heart attacks and broken bones.

Before the Affordable Care Act (ACA), such plans would have been marketed not as health insurance, but rather as wellness benefits. Few employees will likely understand what a skinny plan is and what it does not cover, especially if the employer calls it a “minimum essential coverage” plan. That sounds like it would cover, at least partially, such things as emergency care.

A worker in northern Minnesota thought she had what a lot of us might consider “regular” health insurance until she broke her wrist and required surgery. She was hit with $19,000 in bills.

An expensive emergency is a terrible way to learn the limits of your coverage.

How Can This Be Right?

A loophole exists in the ACA. Employers are permitted to offer these plans, though plan participants are not supposed to pay more than 40 percent of their medical expenses. But because the employers offer some benefits to employees, they can avoid a fine of $2,000 per employee.

However, if an employer offers such a plan and it is not considered “minimum value” because an employee’s expenses exceed 40 percent, an employee can apply for a federal subsidy to purchase coverage through the health insurance exchange in use for that state. If the employee goes this route, it’s possible it could trigger a $3,000 fine for the employer. However, a $3,000 penalty that would be triggered only for some employees, versus a $2,000 penalty that would be owed for every employee because insurance was not offered, might sound to the employer like a good gamble to take.

An especially difficult situation for the employee occurs when the employer offers the MEC plan plus another option, one that pays at least 60 percent of medical costs and has a premium contribution cost that comes in just under the ACA’s 9.5 percent wage threshold (that is, premiums cannot be higher than 9.5 percent of an employee’s wages). In such a scenario, few employees would take advantage of the richer plan because of the cost, but the employer is protected from the $3,000 fine levied for forcing the employee into the subsidized market. Additionally, the employer still has very low insurance costs because few to no employees choose the higher-priced plan.

A cruel twist occurs in this instance, however. Because both plans are offered and deemed “affordable,” the employee is both locked out of the subsidized insurance market and unable to afford insurance that covers emergency and other basic care. Therefore, they must take the MEC plan that covers little more than wellness benefits.

What Can I Do?

The bottom line is: You should review exactly what is covered by the health insurance you have with your employer. Should you have a “minimum essential coverage” or “MEC” plan that does not cover emergency care or hospitalization, take what steps you can to find additional insurance or financial assistance. We recommend you do this before you have a costly health emergency. One bad accident can and does bankrupt families in such a situation.

When life goes wrong, we fight for what’s right.

The Louthian Law Firm has served Columbia and all of South Carolina for over half a century. Our passion for helping injured people in our community remains as strong today as when attorney Herb Louthian founded the firm in 1959. We are proud to be a part of this community, helping our neighbors when they need someone to stand up for their rights. We are family-owned and family-focused.

Should you believe you have an injury or accident case, call our lawyers today toll free at (803) 454-1200. You can also fill out our online contact form. Louthian Law Firm. Seeking truth. Securing justice.