Since 1998, my general agency has actively assisted healthinsurance agents in the implementation of hundreds of group limitedmedical plans aka “minimeds." I’d like to weigh in on the present and future role ofthese plans and cut through some mythology, confusion and outrightdistortions surrounding them. The group limited medical planindustry encompasses a number of very different plans and carriers.These plans provide core medical insurance to a broad range ofconsumers.

The potential member’s perception of value and interest inenrolling in a limited medical plan depends on a number of factors,notably:

• The ability to afford your health plan (high premiumshare)
• The ability to afford family inclusion in your group plan(premium share)
• The ability to afford to actually use your health plan (highdeductibles)
• Amount employer pays towards premium
• Amount of acceptable out of pocket risk
• Access to first-dollar benefits
• Length of probationary period (new hires)
• Insured’s likelihood of illness or injury (preexistingcondition)
• Availability of supplemental benefits (cancer, LTC, CI)
• Existence of financial barriers that may discourage access tohealth care

Our firm has operated in this professional space for more than14 years. In that time, we’ve seen a slow but growing willingnessby workers to “trade off” catastrophic protection in exchange foraccess to first-dollar benefits. Although it is demonstrably truethat many employees confuse limited medical plans with moretraditional major medical insurance, when these plans areadequately explained and workers understand the risks and rewards(access in exchange for risk) the majority will take the limitedmedical option and fully understand it’s limitations.

From our own experience, most CEOs, CFOs, HR managers andbrokers have an opposite view of what employees and their familiesactually desire. We attribute this disconnect to a tendency for allof us to apply our own perspective (lost in our own selfish view)to those we think we serve.

Two Categories of Plans
As mentioned above, there are many different types of limitedmedical plan designs, but only two categories. They are:

Expense incurred plans — These plans areclosely associated with the term “mini med” and are a derivative ofmajor medical (traditional) insurance. These so called “mini meds”have been popular with employers and low-wage workers for manyyears, because they have extremely low premiums and are generallyoffered on a low weekly payroll deduction basis, making them seemvery affordable.

These low premiums are actually a result of highly restrictivemonthly or annual limits or “caps” on benefits. These “caps,” alongwith other financial “barriers” such as: pre-existing conditionlimits, copayments/co-insurance and deductibles further reduceinsurance company exposure. An unanticipated (although many thinkit is by design) consequence of a “low cap” mini med, is theunfortunate tendency for it to be confused with comprehensive majormedical coverage, this has proven to be a very real problem for allparties concerned.

Since these plans are marketed to low-income, high-turnovergroups and often contain a preexisting condition eliminationperiod, enrollees often have left their jobs before they’re eveneligible for benefits. Even when claims are incurred and filedproperly they are, more often than not, rejected or delayed as apre-existing condition (adverse selection due to chronic conditionsis far more common with high-turnover, low-income employeegroups)

To many of us, the good news coming out of PPACA is that, as ofNov. 23, most of these (expense incurred mini med plans) will betightly regulated under the “cap limit” rules. In our view, we willbegin to see these plans exit the industry beginning this year.

Fixed indemnity plans (the ones you don’t hearmuch about) — Also known as supplemental/hospital indemnity ordefined benefit plans, they serve the same general purpose and alsoprovide affordable benefits to the employer market, as the mini medplans described above.

Indemnity limited medical plans are filed, approved and therebyregulated differently than expense incurred (mini med) plans andare not subject to most of the “cap limits” imposed on mini medplans. This very significant difference allows indemnity limitedmed plans to continue to be freely marketed to new employers and inmany cases to take over (rescue) existing expense incurred mini medbusiness. (Note: indemnity plans are not easily confused withtraditional insurance because they do not use traditional insuranceterminology, such as deductibles, co-insurance, reasonable andcustomary and coordination of benefits)

Differentiating features of fixed indemnity plans versus expenseincurred mini meds:

• First dollar benefits
• Terminology – no use of traditional insurance terms(deductible, co-insurance, copayments)
• No pre-existing condition limitations on outpatientservices
• Easier to explain and understand (fixed dollar benefits forcovered services)
• Claims can be more easily adjudicated (no pre-ex)
• Similar premium amounts compared to mini meds
• Generally higher payouts for hospital surgical claims
• Not subjected to federal law restricting annual or lifetimecaps
• Direct assignment of claims to providers (not reimbursement tomember)

A side note: Often these plans are confused with so-called“worksite benefits” — payroll-deducted, specified illness planssuch as ones offered by some of the larger carriers. Limitedmedical plans differentiate themselves from voluntary worksiteproducts in three ways; They are guaranteed issue, have one rate(not age banded for rates purposes) and are more likely paid for byemployers. Limited medical and worksite plans operate side by side,but are not the same thing. Fixed indemnity limited medical plansoffer a viable alternative (or improvement) to group expenseincurred mini meds.

These plans are clearly less restrictive and confusing. Theindemnity model has the additional advantage of being flexibleenough to be offered as a supplement (first dollar foundation) forhigh-deductible major medical plans. Hopefully, this informationwill prove useful as new (to many) or clarifying information (toothers) to counter myths and the confusion brought about by recentpolitical and media portrayal of the products under the heading“Mini Med.”