Employers Advantage
Limited Medical Plans Versus Mini-Medical Plans – Overview
There has been a tremendous growth in the number of people who are participating in what has become known as either Limited Medical or Mini- Medical Plans. While their principal appeal being affordable rates, people must understand these programs provide limited benefits. They do however; remain a viable alternative to provide coverage for basic health services if there is no access to, or ability to afford, major medical protection.
There are basically 3 types of these programs:
(All types also include Preferred Provider Networks to benefit from pre-negotiated discounted services.)
- Limited Benefit Medical Plans: Limited Benefit Medical Plans are designed to be easy to understand as the employees are given a range of benefit options to select from with fixed levels of indemnity reimbursement. It has been our experience with these types of fixed benefits that payments are easier to describe and understand and they impose no pre-existing condition limitations, deductibles or coinsurance. Plans allow payment assignment to providers or direct cash reimbursement. There is no medical underwriting, but these do have participation requirements
- Mini-Medical Plans: Mini-Med Plans are paid on an expense reimbursement basis, and they generally appear to be similar to major medical coverage but typically have very low annual caps on expenses. These plans feature copayments, deductibles and coinsurance benefit designs. They may also impose front-end deductibles, coinsurance and most often, pre-existing condition limitations, but may also issue certificates of prior credible coverage
- Mid-Med Programs: These increase benefit levels to higher annual levels of up to $25,000 or $250,000 on either a reimbursement or scheduled basis.
The Growing need for Product Innovation
While limited medical plans remain most commonly used by workers who do not qualify for a company’s full medical plan often because of their part-time status or limited tenure, the economic downturn has led some employers to switch from major medical plans to limited medical in order to keep from offering no benefits at all.
“The benefits have grown to a point that people look at them as a good benefit offering, and then there are so many employers that need a different solution than major medical at this point,” says Brian Robertson, Executive Vice President, Fringe Benefit Group.
While there aren’t as many new carriers entering the limited medical marketplace as the industry saw a few years ago, those that remain are continuing to expand their benefits, says Robertson. Monthly rates of $100-$200 per employee are allowing employers that can no longer afford their major medical plans to maintain a base-level of health care for their workers “that’s a little stronger than limited medical plans have traditionally provided,” he says.
Both types of limited medical coverage, fixed indemnity, where employers get a fixed payment depending on the number and type of services they receive, and expense-incurred plans, which involve copays and pre-existing condition limitations, are expanding.
For example, Robertson says fixed indemnity surgical benefits are moving from a $3,000 annual maximum to amounts as high as $10,000, and hospital daily allowances are growing from $1,000 to $2,000. Additionally, higher-cost diagnostics such as MRIs and CT scans are being covered rather than stopping at simple x-rays or blood tests.
Robertson says Fringe Benefit Group is seeing more small employers, specifically in the 20-to-100 life range, who have traditionally offered major medical, switch as they are priced out of the market. “They can’t afford $350 or $400 per month for their major medical coverage, but they are willing to spend $200 or $250 a month on an employee for medical coverage, so that forces them down a tier, and the limited medical programs are growing to meet that need,” he says.
Having a “mini-med” available to employees can serve as a retention and recruiting tool, as well.
Medical Trends for 2010 and Beyond
While Congress continues the debate on health care, the costs are burning employers. Family coverage premiums have soared 131%, on average, over the past decade. Change will take extended time, so if Congress passed a bill tomorrow, it wouldn’t kick in until 2013 or beyond.
Meanwhile, employers must try to cope. A few firms will end worker coverage because they just can’t afford to continue offering it. Others plan to move aggressively on costs, drawing on a range of options to limit spending.
Cost shifting will be carefully targeted. Instead of making employees pay more in premiums, most firms will hike copays, deductibles and limits on out-of-pocket expenses, often by a third or more. That keeps paychecks intact while creating incentives for participants to hold down their medical expenses.
Health insurance carriers and administrators report projected medical trend factors in 2010 will again be between 10-13% depending on the type of plan. Trend factors are very much impacted on the size of the employer, type of benefit plan elected and the funding methodology. At the same token, never forget that this is a trend factor that grows on a compounding basis.
Medicare trend factor is at about 7%, principally as a result of Medicare’s ability to limit or freeze reimbursement to participating providers. The excess then spills over to Medicare Supplement Plans. The risk of medical malpractice also makes providers more cautious and inturn, ordering more diagnostic tests. Large increases in medical malpractice insurance premiums force providers to increase their fees.
However, the area of great concern should be the decline in employer provider health coverage. According to the Economic Policy Institute, employer-based coverage remains the principal form of health coverage, with 62.9% of people under the age of 65 covered. This rate has fallen every year since 2000, when it was at 68.3%. In the very small employer market, with employees of 5 or less, it has recently been reported that in California less than 20% of these employers continue employer-sponsored health insurance anymore.
What Can An Employer Do Now?
First of all be pragmatic. Understand that you cannot absorb all the costs perpetually. Work towards a multiple year benefit vision and view health insurance as a partnership between the employee, who is the health consumer, and the employer, who in most cases generally wants to be able to help his employees. A more realistic approach is that an employer’s role should be to provide catastrophic health insurance protection with the employees opting and paying (pre-tax) for voluntary insured indemnity programs that can provide coverage for basic health services, at highly affordable rates. Competition will be a driver to keep these plans attractive. A consolidated administrative funnel is also important to make this functional.
Employers who employ as few as 15 or more people may want to visit the concept of partial self-funding. Partial self-funding has natural cost saving advantages through the flexibility of benefit design, elimination of mandated benefits, tax reductions and carrier charges. But, one must understand that partial self-funding does have contingent liability. Most particularly, you need to make certain you deal with an insurance representative with experience in self-funding. We also recommend the use of an independent Third Party Administrator (TPA) to insure medical privacy, PPO re-pricing, plus all claim and customer services.