By Sherman Edwards, Employee Benefits Advisor
For the past few decades workers have increasingly relied on their jobs for access to health insurance, which would presumably be out of reach financially for most American workers. There are still employees who cannot afford major medical insurance, even when subsidized by their employers. It would likely be a stretch for a low wage worker, making $10 an hour, to afford even the average single premium of $480 or $1395 for a family (as stated by Kaiser). The average employer pays 80% of the premium for a single employee and 70% for a family. While generous, this still leaves a low wage hourly worker with a car payment-sized monthly healthcare premium. This leaves the employee with two choices: 1) Waive coverage; which still leaves the employee liable for the individual mandate 2) Pay for the coverage; which makes them stretch their already tight budget.
With limited benefit plans, also called skinny plans, the employee now has another option that gives them access to care in the event of an accident or sickness. Limited Benefit and Minimum Essential Coverage (MEC) plans, once only used for high turnover low hourly wage industries like restaurants and staffing companies, have been gaining more traction among many other large employer groups.
MEC and limited benefit plans are not major medical plans. MEC plans provide 100% preventive coverage as required by the ACA. These plans also satisfy the individual mandate, and the 4980H(a) penalty, which is a part of the employer mandate. These plans average in the market place around $15 PEPM (per employee, per month) for single coverage, and are usually bundled along with a limited benefit plan.
Limited benefit plans are a fixed indemnity plan and pay set dollar amounts based on a schedule of benefits for most medical expenses. For instance, a plan could provide four physician visits a year and pay $60 per visit, or $500 for an Emergency Room visit. These plans average around $60 a month for single coverage, and most carriers require the employer to pay at least half of the premium with lower premiums given if the employer pays a higher percentage of the monthly premium. Not only does the plan give affordable access to healthcare for hourly and part time employees, it saves employers money as well, by being significantly cheaper than major medical insurance.
The only major medical alternative for the low wage hourly worker has typically been a Minimum Value Plan, which usually has a $5000 deductible and averages two to three times as much as the limited benefit plan bundles. More employers are starting to put their workers into classifications, placing their hourly workers in one classification and salaried employees in another; the employer can then offer their hourly employees the limited benefit plans and save money.
Aside from the cost saving aspect of these plans, skinny plans can also be used as a recruiting technique for part time workers who, without a working spouse, may have no coverage at all.
Limited benefit plans are not a cure all for rising healthcare costs and a competitive benefit package, but can be a great help to some of an organization’s hardest working employees, and can make their bottom line a little less skinny.
Visit our new website at bbtex.wpengine.com and contact us for more information on ways to save money on your employee benefit plans.