Limited Benefit Medical Plans: A Solution For The Uninsured

Here’s a situation you may be familiar with: A hard-working entrepreneur–like me, many of you and most of the people I work with–suffered from a persistent, aggravating cough. But he was early in his career with a fledgling business, so like many people without health insurance, he decided to ignore the cough.

If he didn’t work, he didn’t earn, and spending money on health care at the time seemed like an expense he could do without. However, that decision turned out to be a costly mistake. The treatable cough became pneumonia, which led to congestive heart failure.

Early treatment and detection is a proven element in preventing many catastrophic illnesses. The story has a happy ending: This entrepreneur, a colleague of mine, recovered and enjoys a successful business today. But it doesn’t turn out that way for everyone.

For a majority of the 47 million uninsured Americans, obtaining health care is not an easy choice–even though the vast majority of these uninsureds belong to a family with at least one working member, according to the U.S. Bureau of Labor Statistics.

A growing number of workers are employed by businesses that cannot afford to offer health insurance. Too many employers must decide between cash flow and compensation. Health care benefits help employers recruit and retain high-quality employees.

The resulting competitive advantage comes at a cost, and smaller businesses are hit hardest: LIMRA International says fewer than half of small businesses offer a group life or health benefit to their employees. And those businesses that do offer health insurance frequently subsidize only the employee’s coverage, leaving employees responsible for the full cost of insuring their dependents.

And that cost can be staggeringly high. Medical insurance costs have been outpacing the rate of inflation for many years. Between 2000 and 2006, health insurance premiums increased 87%–four times the growth in wages, according to the Kaiser Family Foundation. That trend continued in 2007, and the Kaiser Family Foundation says spending for health care services is expected to reach 17.7% of the nation’s gross domestic product by 2012.

You can offer your clients a solution for their businesses and their employees: a limited benefit medical plan. This relatively new type of coverage is not well-known to many brokers or employers. But it can provide an attractive, cost-effective solution for businesses of all sizes in many market sectors. And by providing your clients a new solution to their benefits needs, you can maintain both stronger relationships and your income stream.

Limited benefit medical plans are insurance products that help pay for non-catastrophic medical expenses. Though not a substitute for major medical coverage, these plans pay a limited set of benefits with a fixed benefit amount.

There are two main types of limited benefit medical plans:

–Indemnity-based. A predetermined flat dollar amount is paid for each benefit. For example, a plan might pay $50 for a doctor’s office visit, whether the doctor’s actual charge was less or more. These plans typically have negotiated discounted fees with health care providers through a preferred provider network. Indemnity-based plans tend to be simpler to understand, enroll and administer.

–Expense-based. A percentage of the actual charge is paid for each benefit. For example, a plan might pay 60% of the doctor’s fee, and a deductible might be required also. These plans operate more like traditional major medical insurance, and in fact are sometimes called “mini-med” plans.

With either type of limited benefit medical plan, insured workers have access to routine medical care. It really offers dignified access. Insured workers have a card and avoid the awkward conversation at the doctors’ office and pharmacies about being uninsured. By using the cards, people feel more confident that they can get access to service. And by gaining access to necessary health care services, more catastrophic illness might be avoided.