A growing number of employers are offering limited medical, or "mini-med," plans so that employees can have access to basic medical benefits while waiting to become eligible for a major medical program.

More employers are turning to mini-meds plans as a way to entice good workers to stay with or join their company while controlling the administrative overhead associated with group plans.  For employers, mini-med plans help limit administrative costs associated with the constant upkeep of group health plans as employees come and go. However, as these plans become more popular, employers are finding it increasingly difficult to determine the right program for their company.

"The mini-med industry is the Wild West," says Edelheit. "It's nearly impossible for an employer interested in mini-medical plans to find out who the real players are - what's quality, what's not and what doesn't work." Edelheit cautions employers to be wary of "smoke-and-mirror plans" that appear to provide good coverage, but which in reality fall short of employees' needs.

Industry analysts agree that companies providing insurance products and services must provide clear program descriptions when conversing with agents or brokers. "In this mini-medical marketplace, education is huge," comments William Kramer, assistant vice president of Reliance Standard Life Insurance Company, headquartered in Philadelphia. "Educating the employer, employee and the broker on what they purchased is gigantic. You need to make sure they know that they have not purchased a major medical plan, and as such, your premiums are not as high."

Limited medical coverage is offered in two forms: indemnity plans that pay 100% of covered costs and "copay" plans that require cost sharing.

• Indemnity plans pay the provider a fixed rate for medical services, including doctor visits, hospital stays, prescription drugs and wellness exams. Members are responsible for the difference. In most indemnity plans, members don't need to pay up front or submit a claim for reimbursement.
  
  
• Copay plans pay a percentage of a network discount price or usual customary charges incurred. The provider submits the claim, and plan members are responsible for any applicable deductible, copayment, coinsurance or charges in excess of the benefit maximum.

Insurance providers disagree on which of the plans is more effective. "Indemnity is not very specific," comments Kathleen Schneider, head of marketing and sales at SRC, a benefits provider based in Columbia, S.C., acquired by Aetna in August 2004. "If it's not on the list of services, indemnity might not cover it all.

However, indemnity plan proponents say these products are preferable because they are straightforward. Employees purchasing a mini-med copay plan may think they're getting the full benefits of a major medical plan.

"Indemnity is great because there's no copay or coinsurance, and therefore no confusion," says Edelheit. "The employees are never going to think they have anything more comprehensive than they do."  In addition, indemnity plans are not subject to medical underwriting and are issued without pre-existing medical limitations, whereas some copay mini-med plans may turn down an individual based on pre-existing conditions.

Despite the differences between the two types of plans, providers on both sides of the debate agree that mini-med plans are increasing in popularity, especially as the number of uninsured in the country continues to rise.

Recent data from the American Association of Healthcare Consultants indicates that 86% of employees use less than $1,001 in health benefits a year. This suggests that many workers would be interested in stopgap plans with a low-dollar premium base that can provide them access to pharmaceutical drugs and basic medical care.   "Employees want first-dollar benefits," says Edelheit. "If they buy a catastrophic policy, they won't be able to afford the deductible."

The mini-med market potential is evident by the purchase of limited benefit providers by large HMOs, including Aetna's purchase of SRC, and Cigna's purchase of Star HRG, based in Bloomfield, Conn., this past July. "I think you're starting to see a tremendous amount of interest in this business," comments Kramer. "These are not cheap plans - they're affordable plans."

Says Duczak, "Limited medical is not going to cover major medical-type benefits, but everybody in this market would agree that it's better than nothing."

Adapted from Chris Silva - Employee Benefit News • December 2006