Between now and 2013 (or whenever health care reform changes begin), you still have bills to pay and a livelihood to earn. And while limited medical plans are not the reason for reform, they certainly contribute to the debate. Fairly or unfairly, people misconstrue facts, figures and intentions all the time. As brokers, it's important to keep a clear head and work toward making sense in 2010 as your next step. Limited medical plans are a key component of health care today and certainly in our future.
Limited medical benefit plans have traditionally been used with large employers who have part-time, hourly or seasonal employees. They provide a solution they are affordable, and easy to access and use. There are no pre-existing condition limitations (except critical illness), no copays or deductibles, no waiting periods, and flexibility in plan design allows the benefits to fit into almost every situation an employer faces.
The size and shape of the actual limited medical plan itself has also changed significantly in recent years today's plans are more robust and offer benefit levels that are significant enough to attract more and more employers.
Generally speaking, limited medical benefit programs come in two forms, Fixed Indemnity and Expense Incurred (sometimes referred to as coinsurance-based). Fixed indemnity plans provide a specified benefit for a specified service or occurrence and are noted for their flexibility, stability and simple nature. Expense incurred plans are popular for features such as a copay and similar benefit delivery as major medical plans. They offer the affordability of a limited medical benefit plan with many of the traditional features of a medical insurance program, including a wide variety of co-pays, coinsurance and deductible options.
Both styles have merit and are widely used. As brokers, it's important to consider the implications when implementing fixed indemnity and expense incurred plans. When evaluating which kind of program to recommend to an employer, three unique issues must be considered: the premium impact on employees, communication of plan designs, and the goals of the employer and whether or not the employer is creating plans that move them toward accomplishing their goals.
The benefits landscape has more options than ever and the broker that carefully evaluates all products and scenarios will present the best value to their client. Brokers are now pitching limited medical to employers who are interested in HDHPs, individual plans, voluntary instead of employer-provided products, and replacement of the major medical group plan with a limited medical plan. And while brokers have achieved success using both forms of limited medical plans in many different ways, they concur that limited medical needs to be part of a company's overall benefits strategy.
"One of the biggest misperceptions we see with limited medical plans is that many employers think the plans are all the same," says Charlie McLamb, president of Southern Benefit Plans, Inc. "There are definitely similarities across the plans, but there are also significant differences and that's why employers need an experienced broker to guide them through their decision-making process. It's not just about comparing the rates, it's about developing a benefits strategy."
Jon Duczak, vice president of The American Worker Plans, sees another common misperception that "people think limited medical plans are only a product for part-time employees. In reality, limited medical can fit into an overall health care strategy part-time employees and possibly full-time employees if it's structured properly."
Like any product, you need to set goals and objectives when you are selling a benefit plan, Duczak says. "I take a long hard look at the client's history when I'm presenting a limited medical solution to them. And it's a completely different conversation if you have a client that doesn't know much about limited medical versus a client that's had limited medical and understands it. They need a strategy for what they expect the plan to do for them before you can begin to determine which product might help them achieve their goals."
Jacob Brown, senior vice president of Willis of Arizona, Inc.'s Human Capital Practice, says he sees two extremes among employers about limited medical plans. Some employers believe plans cover much more than what they do, while others are jaded and don't believe that the plans cover much at all.
"I like fixed indemnity plans because they are easy to understand and utilize," he says. "You go to the doctor and you know how much your plan will cover, $50 or whatever the amount might be. I think that coinsurance-based plans sometimes create the perception that it's a regular, major medical plan and they aren't."
For Duczak, asking lots of questions about prior benefits usage is critical. "How frequently do they change products, how do they respond to rate changes? Once you have a sense of what's gone wrong with their benefit strategy in the past, then you can help formulate a strategy to fix it."
"One of the most important conversations you have with a prospect is when you are helping them determine their overall benefits strategy," McLamb advises. "If you have an employer who wants a plan that looks like the core major medical plan they are used to, then you might consider a coinsurance-based plan. If you have an employer who needs to hold the line on costs and doesn't want to be subject to substantial rate changes, then I will tell them to look at a fixed indemnity plan. You're going to get price stability and it's somewhat easier to utilize."
Brown considers several factors when evaluating options with his clients. "You need to understand the employee population, how much they make and what they do, the amount of turnover that employer experiences, if the company plans to contribute to the plan and if so, their budget. I'm a big believer in fixed indemnity plans because of the price stability you're going to see less inflation on the pricing with fixed indemnity plans and that's a key factor."
Duczak prefers fixed indemnity plans because they offer several advantages over coinsurance-based plans. For example: rate stability, the members understand what the plan does and does not include, easier communication regarding the plan, and less disappointment for members when they use it because they understand exactly how much the plan will pay.
Other factors to consider when evaluating products include the employee population you are serving, says Duczak. Some plans are suited to groups who will contribute, some are designed for employees who are in a waiting period, some want to offset costs relative to their high deductible plan, some are suited to voluntary and others are designed for employers experiencing high turnover.
While there are many new ways to sell limited medical, Duczak and McLamb concur that there continues to be opportunity it its traditional markets. "We're putting limited medical plans in markets like retail, restaurants, nursing homes, staffing companies and hospitality providers. It's a wide mix we've got small employers, and a wide mix who are restructuring eligible benefit classes, eliminating major medical coverage, reducing core benefits," Duczak says.
"Any group with a disproportionate number of non-benefit eligible employees, like retail and manufacturing, is a good prospect for limited medical," agrees Brown.
"In 2009 we have definitely seen our business trending upwards," Duczak continues, "which is significant in a market where there is so much uncertainty. I think that definitely shows that there is a need for limited medical plans."
The coming months will see limited medical products on the chopping block as part of the nation's potential massive health care reform. How you use the product today to enhance your benefits conversation and strategy is up to you.
Brian Robertson is executive vice president of Fringe Benefit Group, which markets and administers the Framework Health Plan. Fringe Benefit Group has provided and administered limited medical plans for 20 years and today its clients include many of the nation's leading retail, hospitality and staffing companies. Contact Brian at (800) 551-3424 or brobertson@frameworkhealthplan.com.
