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On the Third Hand: Skinny plans

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Josie Martinez of EBS Capstone has posted a great blog article about the “skinny plan” strategy for coping with the Patient Protection and Affordable Care Act. 

PPACA, of course, is going to impose all kinds of stupendous rules starting Oct. 1, 2013, or Jan. 1, 2014, or on some other date to be announced. (Unless some lawyer gets lucky and PPACA does no such thing, or some other amazing event occurs and makes folks wish they had used the conditional mood when referring to what the law could do, rather than the indicative.)

PPACA is supposed to require some individual people to have “minimum essential coverage” or else pay a penalty tax. (In the first year, the tax will be just $95.)

PPACA also lets employers with 50 or more full-time equivalent employees choose between offering coverage with a minimum value or paying a penalty.

If an affected employer offers no coverage at all, and at least one employee qualifies for subsidized coverage purchased through the new PPACA exchange system, the employer must pay an amount equal to $2,000 times a sum equal to the total number of full-time employees minus the first the first 30 full-time employees.

If an affected employer offers a skinny plan — coverage that fails to provide minimum value but is some kind of group coverage — then the penalty will be equal to $3,000 times the number of employees who actually go out and sign up and qualify for the new PPACA health insurance subsidy tax credit.

“This penalty would be much less than the penalty associated with not offering any health plan at all (the $2,000 penalty/every full-time employee),” Martinez writes.

The large-employer plan would have to meet some PPACA standards dealing with benefits limits, preventive services coverage, and appeal rights, but it would not have to cover the same kind of “essential health benefits” (EHB) package that PPACA is supposed to require an individual policy or small-group plan to cover.

On the one hand, in the real world: If large employers offer really horrible plans, and those plans lead to horror stories involving photogenic children, or older ladies who are the pillars of their church communities, then federal regulators may find a way to force skinny plans to fatten up.

But, it hit me that, on the other hand: Maybe letting reasonable sensible, well-run skinny plans flourish would be a way for employers, insurers, regulators and health policy groups to figure out how much coverage people really need to maintain people’s health at reasonable level, avoid burdening providers with excessive uncompensated care, and avoid leading to large numbers of tragic news stories involving unlucky community pillars.

Members of Congress designed the EHB package by putting in whatever they had to put in to get PPACA through Congress. The package and minimum value rules do not necessarily reflect the level and type of coverage people need to avoid scary headlines. In theory, it could be that having an intelligently designed skinny plan could lead to better health outcomes than a poorly designed rich plan, because the skinny plan could protect enrollees from providers’ tendency to provide unnecessary care that could occasionally be harmful. Maybe the evolution of the skinny plans could help guide the evolution of the EHB package.

On the third hand: The idea that folks could let a PPACA experiment take place, then evaluate the results in an even-handed fashion, seems difficult to imagine.

Maybe we could just cut to chase, figure out who the leading 2016 presidential contenders will be, and put them in a Hunger Games competition in a mud pit. Seems a lot more realistic (and entertaining) than calm analysis of health policy experiment results…

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