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Limited Benefit Medical Plans: A Solution For The Uninsured

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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.

Premiums can be employer- or employee-paid, or a combination of both. Offered through the workplace at group rates, these plans can meet the need for affordable, limited and clearly defined health benefits for full-time and part-time workers who don’t have access to major medical insurance and need some coverage for basic, routine medical expenses.

Limits hold down rates

Unlike most major medical plans, limited benefit medical plans don’t provide comprehensive health care coverage or cover catastrophic illness. They also cap total annual benefits paid at much lower amounts to keep them affordable.

Major medical insurance plans frequently cap benefits at between $100,000 to over $1 million.

Limited benefit medical plans may cap at a specific dollar amount, such as $5,000 per year, or based on the use of the benefits. For example, a plan may pay for six office visits, three diagnostic tests, three ambulance trips, etc.

These limits keep the plans affordable yet still offer coverage for much-needed basic health care–ideally before conditions worsen and treatment costs escalate. My colleague’s persistent cough that turned into a serious illness obviously would have been easier and relatively inexpensive to treat earlier rather than later.


Communication and packaging are the most critical elements in implementing a limited benefit plan. If employees don’t understand the scope of their coverage, they may become frustrated with it. In addition, packaging the limited benefit medical plan with voluntary benefits improves the coverage options and can help drive participation in the plan.

By partnering with a carrier that offers benefits communication and enrollment capabilities, each option can be tailored to that employee’s specific need. Through one-on-one meetings with a professional benefits representative, employees are more likely to understand, appreciate and take advantage of their benefits plan.

The best voluntary benefits providers also can package the limited benefit medical plan with additional voluntary products to create broader coverage options for employees. For example, by supplementing a limited benefit medical plan with critical illness, cancer or disability insurance, employees are able to affordably secure additional protection for their families.

Until spiraling health care costs can be contained, businesses are seeking out innovative ways to win and keep the best and brightest employees, while maintaining the bottom line in a tough economy. Limited benefit medical plans, matched with benefits communication and an array of voluntary benefits options, may well be today’s answer for a sizable portion of uninsured workers and their families.

By expanding your health insurance portfolio to include limited benefit medical plans, you have the opportunity to build strong client relationships and open new markets–while also meeting a critical need for basic health care coverage for working Americans.