Obama Administration Closing Health law Loophole For Plans Without Hospitalization

Moving to close what many see as a major loophole in Affordable Care Act rules, the Obama administration will ban large-employer medical plans from qualifying under the law if they don’t offer hospitalization coverage.

The administration intends to disallow plans that “fail to provide substantial coverage for in-patient hospitalization services or for physician services,” the Treasury Department said in a notice Tuesday morning. It will issue final regulations banning such insurance next year, it said.

Hundreds of lower-wage employers 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 don’t provide minimum coverage. Some have enrolled workers for insurance beginning Oct. 1.

For employers that have committed as of Nov.4 to such coverage, the administration will temporarily allow it under the health law, the notice said.

As reported by Kaiser Health News in September, an online calculator published by the Department of Health and Human Services allows large-employer coverage to pass the law’s “minimum-value” standard even if it doesn’t include inpatient benefits. Many see the calculator as flawed.

For employees enrolled in such plans, the disadvantage is double, say consumer advocates. Not only do they lack hospital coverage; but if employees are offered insurance passing the minimum-value standard at work, they are barred from receiving federal subsidies to buy better coverage through online marketplaces.

The administration said in Tuesday’s bulletin that it intends to fix that problem, too. Final regulations will say that “in no event” will workers offered such coverage be disqualified from subsidies, the notice said.

The administration had signaled last month it would move to disallow plans without hospital benefits from passing the minimum-value test. Large employers that fail to offer minimum-value coverage next year could be fined up to $3,120 per worker.

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