Medicare Compliance & Reimbursement

Escalating health care costs push employers to consider bare-bones options.

Consumer-directed health care coverage isn't the only trend plans should track as companies desperately attempt to find ways to provide coverage for their employees.

Employers are not only turning to new developments like CDHC but also experimenting with bringing in plan designs that have until now appeared in marginal segments of the marketplace. Here's what plans need to know about the increasing popularity of one of those existing designs: limited-benefit or "mini-med" health plans.

Mini-Meds Are Set To Break Out Of Their Niche

Limited-benefit health plans began in the 1980s as an option for lower-paid, hourly and part-time workers who couldn't afford--and whose companies couldn't subsidize--comprehensive health insurance. One of the early players, Phoenix-based Star HRG, originated from a program to cover Circle K convenience store employees, according to Star HRG senior vice president Ben Rozum.

The mini-meds aim to supply first-dollar coverage with a manageable premium, explains Steve Peterson, COO of Strategic Resource Company (SRC), a limited-benefits specialist Aetna acquired in January 2005. Premiums generally run to about $50 to $100 monthly, he says.

The benefit pays for the same services that comprehensive-care coverage does, including prescriptions, office visits, surgical procedures and inpatient hospital stays, asserts Peterson. The premiums are less expensive because the plan establishes a maximum annual benefit--usually in the neighborhood of $10,000--and places a limit on outpatient services of $1,000 or so per year, he adds.

As for marketing limited-benefit plans, the process is sophisticated, says Rozum. "Usually, what you have is a broker or consultant bringing these plans to a higher-level human-resources person, like a vice president," he explains.

These designs attract employers who rely most heavily on hourly and part-time workers, particularly retailers and other service-sector companies, temp agencies, call centers and some health care workers (especially nurses), Peterson notes. Employers such as restaurants, security firms and janitorial services also tend to seek these policies, Rozum adds.

Carriers can learn a lesson from the trend. Mini-med plans are appealing to these populations for two main reasons. First, the first-dollar coverage allows workers to see a doctor for conditions that "otherwise would go untreated or require an ER visit," Peterson says. Second, these workers often occupy a dangerous middle ground regarding insurance eligibility.

"Without our insurance coverage, people will 'go bare'--remain uninsured. They won't qualify for state aid, but they can't afford individual insurance," laments Rozum.