Mini Medical Plans On The Move
Mini medical plans and other limited benefit health plans may be secret hits.
Published statistics on mini med plans and related benefits products are hard to find. But John Edelheit says he thinks the market for employer-sponsored mini med plans and other employer-sponsored limited benefit health plans is booming.
Edelheit is vice president of sales and marketing at United Group Programs Inc., Boca Raton, Fla., a broker that sells plenty of conventional insured and self-funded major medical plans. The company also distributes mini med plans underwritten by Pan-American Life Insurance Company, New Orleans.More than 40% of United Groups new group health customers are buying mini med plans, and about 1% of United Groups traditional group health customers are shifting at least some of their employees to mini med plans, Edelheit estimates.
The mini medical market, says Edelheit, “has caught on and spread like wildfire.”
Edelheit predicts that use of mini med plans will soar at his brokerage and others over the next 2 years as conventional major medical prices continue to skyrocket.
Jeff Morgan, a field vice president in the Jacksonville, Fla., offices of Allstate Workplace Division, a unit of The Allstate Corp., is seeing fast growth in critical illness insurance sales and moderate growth in mini med sales.
But mini med sales could accelerate at Allstate because agents “are very interested in mini medical,” Morgan says.
A mini medical plan is an inexpensive health insurance plan that provides far lower benefits than the typical comprehensive major medical plan.
Many good comprehensive plans will pay hundreds of thousands of dollars in benefits over the course of a year. Annual benefits maximums at the typical mini medical plan might range from $1,000 to $25,000.
Bonnie Brazzell, a vice president at Eastbridge Consultants Inc., Avon, Conn., puts mini med plans in the limited benefit health product category. The category includes the venerable hospital indemnity policy, which pays a fixed indemnity benefit for each day of hospitalization, and the supplemental health insurance plan, which helps fill in gaps in conventional major medical plans.
The mini med plan is the cousin of critical illness policies, which pay benefits to insureds affected by certain specified medical conditions.
Most states exempt limited benefit health insurance products from conventional major medical plan mandates, and some insurers, such as Allstate, avoid state benefits mandates entirely by selling mini medical only to employers with more than 50 workers.
For many insurers, the lighter regulatory burden and conservative plan designs make the mini medical plan market far more attractive than the major medical market.
The underlying cost of care continues to increase at least 10% per year for major medical insurers, but, at the Allstate mini medical plan, “our claims are going up at a pretty reasonable rate,” Morgan says.
The Allstate mini medical program offers 3 plans with annual coverage maximums ranging from $3,000 to $10,000. The low-end plan pays $200 in indemnity benefits per day for a few days of hospitalization, and the high-end plan pays $400 per day.
After the insured makes a 20% co-payment, the Allstate plans will pay 100% of the cost of a physicians office charge during an office visit and 70% of other office visit costs until the patient reaches the annual medical expense maximum.
Pan-Americans mini medical plans, which cost about $50 to $180 per employee per month, pay $200 in indemnity benefits each day for up to 500 days in the hospital. The only prescription drug benefit is a drug discount card.
The high-end plan provides up to $1,000 per day for hospitalization. It also offers a surgery benefit of up to $3,000 and up to $400 per month in prescription drug coverage.
Many mini medical plans also include options that workers with good health benefits take for granted, such as access to a preferred provider network, an employee assistance program and a 24-hour nurse line.
The coverage is usually not enough to cover the full, retail cost of a major operation. But, if a vendor sells a high-end mini med plan together with access to an effective preferred provider network, a mini med plan should be able to cover the cost of several physician office visits, most of the discounted cost of several in-network tests and much of the discounted cost of a few days in an in-network hospital.
Edelheit cites the example of one patient who had relatively rich mini med plan coverage. Thanks to the coverage and an unusually deep provider discount, the patient ended up paying just $900 out of pocket for a $29,000 brain operation, Edelheit says.
In some cases, employers might be able to significantly improve mini med protection by combining mini med coverage with critical illness coverage. Employers who combine Allstate mini medical plans with Allstates critical illness insurance can provide up to $100,000 in additional coverage for insureds who suffer from cancer, heart attacks or other specified conditions.
United Group has created similar packages of mini med coverage and critical illness insurance for at least 2 employers, Edelheit says.