Mini Medical Plans On The Move

Limited benefit plans are getting more attention in the worksite market than in the traditional group benefits market. Eastbridge found when it surveyed worksite carriers that 67% were selling some form of hospital indemnity or medical supplement insurance at the worksite or were likely to add such products in the near future.

But experts interviewed say they are seeing interest in mini med plans growing in the traditional group benefits market.

“The employers are looking to save money, and mini medical is one of the ways they can do that,” Morgan says.

For years, consumer advocates have criticized limited benefit health products. The critics have complained that some states let sales and administration costs eat up 50% of the premium revenue at limited benefit plan programs. The critics also worry that the policies are confusing to consumers, and they say workers would be better off if employers would stretch their benefits budgets by buying health plans with higher out-of-pocket costs.

The United States General Accounting Office published a report in 1988 which concluded that limited benefit health plans had little to offer the typical consumer.

Even some health insurance experts who are vigorous critics of health insurance mandates are unenthusiastic about mini medical plans.

“We think that most people would be much happier with a [Health Savings Account],” says Merrill Matthews, president of the Council for Affordable Health Insurance, Alexandria, Va., referring to programs that combine high-deductible health insurance with personal health savings accounts.

But Matthews is quick to add that even a program based on high-deductible insurance might be too expensive for some employers. “All of us would like to have a Cadillac loaded with options, but we cant all afford it,” Matthews says.

United Group would rather sell ordinary health coverage or high-deductible health coverage to employers, but mini medical plans are usually cheaper than high-deductible comprehensive plans, and many low-income workers care far more about low out-of-pocket costs for everyday care than high coverage limits for catastrophic conditions, Edelheit says.

He agrees with critics who contend that many mini medical plans deliver less than they promise. He says any agent who wants to sell limited benefit health products should check references carefully to verify that a plan and any provider network offered work the way employers and employees will expect.

Even when a mini medical plan lives up to the promises made in its plan documents, it “is not a major medical plan,” Edelheit says. “Its not something I would want to be on.”

But low-income workers who have had to depend on government programs and charity care may find that having even a small amount of private health coverage improves their access to care and increases their ability to bargain for more access, Edelheit says.

He recommends that agents who want to enter the market seek out simple plans and make sure that enrollers explain coverage limitations.

At companies that sponsor mini medical plans, “a lot of the employees can barely speak English,” Edelheit says. Although the employees might be intelligent, industrious and thrifty, “they dont know anything about health insurance.”

Plan members will be much happier with a mini medical plan if they have a realistic idea about what the plan will pay for, Edelheit says.

Today, benefits buyers who are interested in group mini med plans include owners and managers of nursing homes, security firms, temporary employment firms and other companies that employ large numbers of temporary, part-time or low-paid workers, mini medical plan experts report.

In the future, employers might offer specially designed mini medical plans to higher-paid employees who have health savings accounts and HSA-compatible high-deductible health insurance.

The HSA law lets employers and employees deduct HSA contributions if they combine the HSAs with health insurance policies with annual deductibles ranging from $1,000 to $5,000 for single employees.

The authors of the HSA statute have tried to give HSA holders a financial incentive to hold down health care costs by discouraging the use of insurance to eliminate the deductible. But issuers of HSA-compatible health insurance policies can cover preventive care on a low-deductible or no-deductible basis, and the HSA statute states that employers can combine the HSA-compatible health insurance with “insurance for a specified disease or illness, and insurance paying a fixed amount per day [or other period] of hospitalization.”

Today, at United Group, about half of the employers who set up mini med plans now pay some or all of the tab themselves, according to Edelheit.

One example of a company that uses the Pan-American mini medical program as an employer-paid benefit is Electrical Staffing Inc., New Haven, Ind., a national electrical contractor staffing service.

“Our intention is to provide real and usable group benefits to you at no cost,” Electrical Staffing tells prospective contractor-employees through its recruiting Web site.

Electrical Staffing says it will pay all of the cost of a Pan-American plan with a $200 daily hospital indemnity for contractors who work for Electrical Staffing for at least 1 hour in a given month. The daily hospital indemnity benefit increases to $300 for contractors who work for Electrical Staffing for at least 90 hours in a given month.

Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.