As employers continue to struggle with
escalating health care costs, the practice of offering mini medical health
plans is gaining momentum. Also known as
limited benefit plans, mini medical plans
charge individuals as little as $50 per
month for routine medical care.
“Mini medical plans are generally significantly cheaper than individual plans
because employers are in a better position
to negotiate group rates with insurance
companies, whereas individuals cannot,”
says Stephen J. Peck, president of Kapnick
Insurance Group’s Benefits Division.
Smart Business spoke with Peck about
mini medical plans, how they can benefit
employees and employers alike, and what
considerations should be taken into
account prior to launching a mini medical
plan.
What are mini medical plans?
Mini medical coverage is essentially a
limited health plan designed to replace
major medical coverage for those individuals who would not normally be able to
afford their employer’s insurance. Though
mini medical plans provide coverage, it is
very limited to routine medical visits and
prescription drugs. In the event that the
employee needs coverage for a major medical event, this would most likely not be
covered. Also, mental health coverage is
typically not covered.
However, the Business Journal reports
that almost 95 percent of Americans do not
accrue more than $1,000 in medical costs
on an annual basis, so this plan may be
ideal for a large majority of the population.
How can employers benefit from mini medical plans?
These plans were once only attractive to
small businesses with only a few employees. However, large retailers, employers
with lengthy waiting periods and employers with high fully insured deductibles are
now opting for these benefits for several
reasons. First, employers do not need to
contribute to the plan in order to offer it.
Secondly, participation level requirements
are significantly lower than typical major medical plans, generally only 25 percent.
Employers also have an edge on their competition with regards to recruiting qualified
employees. Companies that offer these
plans appear more attractive to hardworking, devoted employees versus another
company without this coverage option or
no coverage at all.
How do employees benefit from mini medical plans?
Employees benefit immensely from these
plans, as most that enroll have never had
the opportunity to purchase health insurance before. With these plans, employees
have access to doctors and can pay for prescription drugs. For many, this is the only
way that they would be able to afford these
necessities to remain healthy. Since the
plans are so economical, it only makes
sense for employees to obtain this type of
coverage. For instance, for $50 per month,
an employee can purchase a $95 monthly
prescription for a $10 co-pay, saving the
individual $35 per month.
In addition, these plans are also extremely beneficial for employees subject to waiting periods before coverage will kick in
with their employers. By allowing employees to have coverage right away, albeit a bit
less than a normal plan, they at least have some coverage to tide them over until their
major medical plan begins.
What factors should be taken into consideration before introducing a mini medical plan?
Although these plans appear to be a great
option for those that could not otherwise
afford health insurance, there are several
downfalls that employers and employees
must take into account. First, employers
typically do not contribute to these plans,
unlike the 50 to 100 percent contributions
often made to traditional major medical
plans.
Secondly, employees who do face major
medical bills because of an injury or illness
will accrue expensive hospital bills without
coverage. Though the policy may cover
$500 in prescription drugs and routine doctor bills, it may only cover $300 of the hospital costs. Even if the employee does not
face major medical problems, these plans
typically have a cap that is fairly low. If the
individual has a series of routine doctor
visits, the plan will not exceed coverage
beyond the cap for any reason.
Employees also can run into problems
when applying for traditional coverage
later down the line. Since they were not
covered under a traditional plan, many carriers will not recognize mini medical plans
as credible coverage. Thus, the employee
appears as though he or she has not been
covered, which may lead to no coverage
for a pre-existing condition. In addition to
these concerns, mini medical coverage is
also not recognized as HIPAA-credible coverage.
Finally, many of these plans have preexisting condition clauses in place.
Although these plans are beneficial to
employers because they are protected
from rate increases, employees may cancel
their plans after getting denied claims.
STEPHEN J. PECK is president of Kapnick Benefit Services.
Reach him at [email protected] or (888) 263-4656 ext.
1147.