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Skinny Insurance Offers Way To Avoid ObamaCare Fines

ObamaCare's individual mandate is supposed to nudge healthy workers to buy comprehensive coverage, either out of a sense of propriety or thrift — not wanting to throw away money to pay a tax penalty.

But a new, low-priced health plan developed by insurers to cover run-of-the-mill medical costs — but not hospitalization or surgery — would let workers dodge the penalty and leave them with a clear conscience.

With the health and expense of ObamaCare's exchanges riding on whether young, healthy people sign up in large numbers, the emergence of this bare-bones employer health offering poses a new risk.

Those defending the individual mandate before the Supreme Court argued that it was not only constitutional but critical to the law's success. Yet it turns out that, thanks to ObamaCare's own rules, the mandate is escapable for workers with the most skimpy employer coverage.

Consider that the cost of this new "skinny" coverage might be about $50 a month, less than the annual individual mandate fine of $695 or 2.5% of wages. (The tax penalty will ramp up to that level by 2016, from $95 or 1% of income in 2014 and $325 or 2% of income in 2015.) Such coverage, skimpy as it is, would be preferable to paying a fine. Emerging skinny plans would help defray the cost of up to six visits to the doctor, x-rays, generic drugs and preventative care, the Wall Street Journal reported.

Having such an option also would give young and healthy workers a lot to think about before decide whether to buy cover age via ObamaCare's exchanges.

Preliminary premiums for California's exchanges just released were celebrated on the left as a sign that insurance shoppers won't be hit by rate shock.

But even with lower-than-expected prices and government subsidies, the policies may not feel like a bargain to modest-wage workers.

The lowest-priced bronze-level plan in California would cost $1,640 a year (on top of subsidies) for a single worker earning 250% of the poverty level or $29,130 a year ($14 an hour).

That's nearly triple the cost of the lowest-priced skinny coverage, but the real sticker shock may come when people look at the deductible of $5,000.

Workers offered a skinny plan might have this choice: Pay $600 for a plan that provides real benefits or nearly three times for a plan that won't pay a penny more until they've put up $6,640.

It's hard to characterize the skinny plans as real insurance, when they don't cover emergency care or surgery. But healthy workers may see the option as appealing since ObamaCare will let them sign up for exchanges within a year without penalty.

Without an individual mandate, the Urban Institute found that a majority of exchange enrollees would be over 45, pushing up average premiums by as much as 25%.

While it's far from clear how broad skinny-plan adoption will be, the plans may be attractive to large employers in the retail, restaurant and accommodation industries with a primarily modest-wage workforce.

As reported, the plans were created to help large companies minimize the cost of complying with ObamaCare's employer mandate.

Employers who don't offer coverage will face automatic fines under ObamaCare of $2,000 per full-time-equivalent worker (minus 30 workers; for example $2,000 times 170 for a firm with 200 employees). But employers who do offer coverage — even the skinny variety — will only face fines of $3,000 per worker who gets ObamaCare subsidies.

Since many modest-wage workers who are healthy may not be prepared to shell out a lot more money to buy the lowest-cost exchange plans, employers won't see a surge in health costs that some have feared.

The bad news is that many workers won't have real insurance in an emergency. Also, employers of modest-wage workers will have a reason not to hire older and less-healthy workers who are more likely to embrace ObamaCare's subsidies.

The good news is that skinny plans may mean employers cut fewer workers to part time — another way of minimizing ObamaCare fines. Retailers have been cutting the hours of nonsupervisory workers at the sharpest rate in more than three decades, Labor Department data show.