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Navigating The Limited Medical Maze

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Recent increases in health care costs have led to tremendous growth in the market for “mini meds,” or “limited-benefit medical plans.”

The fast growth of the market and recent investments in “mini meds” by leading insurance companies suggest that these products are here to stay.

The new products offer great opportunities both for brokers and the employers they serve.

But, before rushing in to the limited medical dance, brokers should make sure they know what they are doing.

The first thing that brokers must understand is that limited medical programs are limited.

Limited medical plans are working very well in many companies across the nation. However, some limited medical plans have been implemented poorly or totally misplaced by brokers.

Beware of the situation that will almost definitely cause disappointment and frustration for all involved.

Its best to avoid products and programs that seek to be a lower-cost solution to the major medical inflation problem.

Moving a company from a major medical insurance product to a limited medical program should never be recommended. This sometimes occurs, and the broker who sells the new program is creating a very challenging situation for himself and the employer. No matter how clearly the distinctions between the major medical and limited medical plans were explained, some employees will not understand until its time to file a claim.

On the other hand, one of the best prospects for a limited medical plan is a group with classes of employees that do not have any employer-sponsored health coverage.

The best markets to pursue are those with employees earning $10 to $20 per hour, because those employees make enough money to afford a plan that costs $20 per week, and the employees will find value in the benefits offered.

This market traditionally has been ignored by the major medical providers because of the difficulty of providing a valuable benefit product at a feasible cost.

Employers that successfully have deployed limited medical programs for moderate-income employees include nursing homes, hotels, retail stores, convenience stores and transportation companies.

Recent research reports suggest that major medical premiums are seeing a lower increase than in years past. That is good for the limited medical market because it will keep employers from trying to make a move from major medical to limited medical. The best approach for selling limited medical is to reach out to the enormous number of employers that currently offer nothing.

Employer contribution for a limited medical program can be a crucial factor to the success of the plan, especially when a plan is serving employers with fewer than 500 eligible lives.

By persuading the employer to make contributions, you can count on several things.

First, the employer is committed to the offering and will invest appropriate resources to make the plan work. In other words, the employer will handle plan communication and administration properly.

Second, employer contributions will boost participation percentages.

Finally, the employers actions will impress the employees, and the employees will take the program more seriously.

Most limited medical programs are guaranteed issue, but some have a pre-existing condition limitation, while others do not. In the high-turnover, hourly position markets that are most typically served by limited medical, this could be a significant factor. Because of the high turnover rates for hourly and part-time workers, a pre-existing condition limitation could disallow care for many members of the employee population being served because of the short time many employees have been in the plan.

In the employees eyes, confusion about plan rules and limits on access to benefits drastically reduce the value of the plan.

Limited medical products generally use the deductible/coinsurance model or the hospital indemnity/scheduled benefit model.

Factors to consider when evaluating the 2 models are how quickly the employee experiences a benefit and what will be easy to use.

People being covered under limited medical programs typically do not have a doctor/patient relationship and have little experience with the delivery of health care with insurance involved. Deductibles and coinsurance can hinder the ability of an inexperienced plan member to use the plan and may detract from the value that an employer is trying to create.

Limited medical plans can be priced anywhere from $6 per week up to $50 per week for single-employee coverage with an employer contribution.

Voluntary plans also are available and would be priced to accommodate the higher risk factor due to the lower participation rate and higher degree of adverse selection.

Like most things in this world, you get what you pay for. There is value to be had in the lower-cost plans, but look for programs that are more flexible in plan design. More flexible plans will allow the employees available dollars to be spent on the benefits that are most likely to be used.

When designing a plan, keep in mind the biggest needs of the population you are serving. Since much of America lives paycheck to paycheck, having money to see a doctor for illness or wellness can be the difference between getting health care and going without.

If we assume that the part-time and hourly employees or employees of employers who offer no benefits are living paycheck to paycheck, then it is easy to assume what would be valuable.

Regular visits to the doctor for employees and their dependents are of high value.

The ability to be seen in an emergency room for “everyday” accidents is of high value.

Help with the purchase of prescription medication is of high value.

Many plans will use non-insurance features to round out the offerings. These products can provide a lot of value, but it is the brokers job to make sure that the non-insurance products are offered at appropriate price levels. Look for plans that will separate the cost of the insurance from the cost of the other features.

is vice president of the Fringe Benefit Group, Austin, Texas. He can be reached at [email protected].

Reproduced from National Underwriter Edition, January 6, 2005. Copyright 2005 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.


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