Closing a Loophole on Subminimum Coverage

California Healthline this week is hosting a discussion on our bill, SB248 (Hernandez) to prohibit subminimum coverage. We sponsored this bill to close a loophole in the ACA that allows such coverage–prohibited in the individual and small group markets–to be offered by large employers, and if taken up could prohibit workers from getting subsidies for comprehensive coverage in Covered California. This bill is up in Senate Health Committee today.

We appreciate the contributions from Julie Silas of Consumers Union and Gerald Kominski of UCLA Center for Health Policy Research. Here’s the full un-excerpted contribution from our policy advocate Beth Capell:


Some of the success that California has had implementing the Affordable Care Act could be undone if the state doesn’t close a loophole that, if exploited by some employers and insurers, could deny workers access to care and subsidies for coverage.

Health Access is proud to sponsor AB248 by Assemblymember Roger Hernandez, to close this loophole, and ensure workers get the care and coverage they need, rather than subminimum “junk” coverage.

Ask yourself if your employer offered you, in Spanish, a brochure on “Freedomcare” which covers:

  • Unlimited eye exams: but not glasses or treatment
  • Diabetes “counseling” but not insulin or other treatment
  • Cancer testing but not surgery, radiation, chemotherapy or other cancer treatment
  • Oral health evaluations but not dental care: no cleanings, no fillings, no root canals
  • Diabetes testing but not treatment
  • Immunizations
  • Cholesterol tests but not treatment
  • Supplements but not prescription drugs

This so-called coverage actually doesn’t actually cover much at all. This “prevention-only” coverage does NOT cover:

  • Doctors
  • Hospitals
  • Emergency room
  • Prescription drugs
  • Lab tests (except as specified)
  • X-Rays, MRIs, other imaging
  • Ambulance

The ACA set minimum standards for health plans, so patients who need care won’t get stunned with huge bills because of exclusions in their coverage. But for employer-based coverage, there’s a loophole. If a worker takes this plan, it gets the employer off the hook for the employer responsibility penalty.

Your employer, and the insurance broker, tells you this coverage gets you out of the individual mandate. They do not tell you that if you take this, you cannot go to Covered California and get tax subsidies. They do not tell you that you might be eligible for free Medi-Cal if your income is low enough.

Right now, an employer who offers such coverage faces no penalty for offering such subminimum coverage. What kinds of businesses this coverage marketed to? Those with low-income workers like agriculture corporations, staffing companies, janitorial services, resorts, golf courses, call centers, landscaping companies, and security firms.

Most health plans do not offer such subminimum coverage in California: not Anthem, not Blue Shield, not Kaiser, not HealthNet, not any of the plans that contract with Medi-Cal managed care or Covered California or that dominate the employer market in California. But we should address this practice before it becomes widespread to the detriment of workers and our whole health system.

The Internal Revenue Service could close this loophole nationally, but until they do, California needs AB248(Hernandez) to put a stop to such subminimum coverage.