The Obama administration is ready to close one of the more notable loopholes in the Affordable Care Act.

On Tuesday, the Department of Health and Human Services (HHS) and the Treasury Department announced in a fact sheet [PDF] that they would begin to more heavily scrutinize extremely basic health plans that do not cover inpatient hospitalization. More details:

The skinny on “skinny” healthcare: The so-called skinny healthcare plans, designed to get around the penalties mandated for large businesses by the 2010 law, cover only basic preventive health services, leaving workers on the hook for the full cost of any other medical expense. However, the low level of coverage receives a passing grade through a “minimum value calculator” offered by the Centers for Medicare & Medicaid Services (CMS) [PDF]. The approach is generally allowed for large businesses, but small businesses can opt into such plans by joining associations offering health plans, USA Today reported.

Closing the loophole: When the calculator’s deficiencies were first reported by Kaiser Health News in September, groups such as the National Retail Federation suggested that the health plans wouldn’t pass federal scrutiny. They were right. In their statement, HHS and the Treasury Department emphasized that relying on the calculator wasn’t enough. “The Departments believe that plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) … do not provide the minimum value intended by the minimum value requirement,” the agencies said, adding they they would make changes to the regulations starting next year.

Industry reactions: The move by the agencies largely received approval from business groups and medical groups alike. The American Hospital Association, which expressed alarm to CMS “that plans could offer health insurance that did not include inpatient hospital benefits,” welcomed the move by HHS and the Treasury to fix the situation. National Business Coalition on Health CEO Brian Klepper also welcomed the move, suggesting that the prior plans were predatory in nature. “The purpose of insurance is to cover the services that most of us cannot afford when we desperately need it,” Klepper told USA Today.

On the other side of the coin, the American Staffing Association, which represents temporary staffing agencies and had endorsed the previous skinny policies, emphasized to The Washington Post that the move was a “positive, constructive, sensible step” and credited the agencies for not penalizing companies that had offered such plans or employees who had taken them.

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