Is this true? Answer: Yes, it is mostly true. In a nutshell, this strategy will likely work to avoid the $2,000 fines that large employers face for providing no coverage. But it won't do anything to alleviate the $3,000 penalty for the provision of insufficient coverage.
Furthermore, small businesses will not be able to make use of this strategy as they are held to higher standard of benefit provision in the law. Small businesses are defined as groups with less than 50 or 100 full time (30 hours) employees depending on which state you are in. California still operates at the 50-employee threshold.
Lastly, in order for an employer to pay the $3,000 penalty for insufficient coverage, an employee must go to a state exchange, fill out what will amount to 61-pages of information, and receive a government subsidy. Many employees will simply not bother going through the hassle. And even if they do, a legal battle bubbling up through the court system now illustrates that because of another oddity in the law, those subsidies may not be available in the 33 states that have opted not to open exchanges and have pushed that chore back on the federal government. (See here and here for more on that.)
Therefore, as a practical matter, large employers may be able to overwhelmingly skirt fines with bare-bones plans.
Here are Christopher Weaver and Anna Wilde Mathews providing more on this in the Wall Street Journal:
Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.
Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.
Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.It is unclear how many employers will adopt the strategy, but a handful of companies have signed on and an industry is sprouting around the tactic. More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients. ...
[A] close reading of the rules makes it clear that [the robust] mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance....
Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach....
Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.
But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won't want to pay the cost of the richer exchange coverage....
I must say I do find it comical that administration officials would be “surprised” that businesses would consider this approach. I suppose that just highlights the epic disconnect between government officials and how how a free-market capitalist will behave. It is a business' obligation to study the rules and act in a way that maximizes profits. Sadly, that still “surprises” the government.
