Why Mini -Meds & Limited Medical Plans Can Deliver Superior Value  When Properly Designed: What are the Pros and Cons?

With healthcare costs rising by double-digits, with no end in site, businesses, particularly small to mid size businesses have looked high and low for alternatives to the high cost of providing healthcare coverage to their employees. High deductible plans know as CDHC’s (consumer directed healthcare), cost sharing options, and HRA’s have hit the market with some success in keeping costs down.

One type of insurance coverage that has emerged in some markets that warrants attention is the Mini-med or Limited Medical Plans. These limited plans keep costs down by not offering the same benefits that typical comprehensive plans do. Most pay for routine medical care such as doctor visits, some surgical benefits and offer some prescription drug coverage but typically cover only a tiny portion of major costs incurred by hospital visits, operations or mental health services.  These bare-bones policies have been popular for several years with some small employers. Now, more companies are embracing these leaner policies as a way to cajole uninsured workers to get coverage or to help struggling employers have the ability to have some kind of healthcare insurance even if they leave gaps in coverage. Many small businesses offer limited medical plans to their employees until they are able to afford a comprehensive plan in the future.  This way, they can attract and keep employees by providing some benefits at a reasonable cost.

Limited medical plans come in basically two forms: group contracts, and individual association contracts. Group contracts typically require a minimum number of eligible employees (i.e. 5, 10, or 50) and also require some small employer contribution towards the total premium. However, premiums for group mini-meds can range from $40/month for single to $150/month and are typically guaranteed issue (meaning there is no medical underwriting and no one can be turned down for coverage). Individual association based plans are more flexible in that they can write down to an individual, and require no employer contributions. However, premiums tend to be more expensive than the group mini-med, and most association plans are simplified issue or guaranteed issue but with waiting periods of 6-12 months for pre-existing conditions.

Features of typical mini-med plans include:

• Guarantee or Simplified Issue
• Large Networks of Providers
• No Waiting Periods
• No Medical Questionnaire to be filled out
• Provider Choice-No mandatory network usage
• No Deductibles
• Benefits Paid First Dollar (no usual and customary language)
• Universal Rates
• Discounted Dental, Vision, Doctor, Hospital and other benefit networks with no limitation on benefits.
• Ancillary insurance benefits such as Accident, Term Life, and Disability benefits

These plans have gained in popularity over the last few years.  They have typically been geared towards blue and grey collar industries such as retail, and service industries.  They have predominately been offered to part-time employees and low income hourly workers, not full-time workers. Although that trend is changing as the high cost of traditional health insurance plans rise.

There are also some negatives that one needs to understand about mini-meds that may take away from the all rosy picture that is sometimes painted by the industry. Critics of mini-medical insurance point out that most employers don't contribute to the plans, as opposed to traditional plans in which employers often pay 80% to 100% of employee premiums. And, they say, these policies won't much help workers who most need it -- those who end up in the hospital facing huge unpaid medical bills. Research shows that up to half of all bankruptcies today are related to medical costs. Another concern, say benefit experts, is that if employees try to reapply for comprehensive coverage down the road, limited plans may not be considered "credible coverage," and applicants could be denied for preexisting conditions just as if they had no insurance at all. The plans have strict coverage caps, which may be as low as $1,000 a year and are rarely higher than $20,000. That means that no matter how high a medical bill is, the insurer won't pay more than the yearly cap. 

The bottom line is these plans are an option for anyone who can't afford the high cost of traditional health insurance and wants coverage for basics such as office visits, lab work and X-rays.