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"Large employers are sitting on the sidelines, waiting to see if some other alternative becomes available under health reform ..."
--John Duczak |
Benefits Business
By Len Strazewski
HEALTH CARE FOR PART-TIME, LOWER PAID WORKERS
Health reform law curtails "mini-meds"; some employers shift to fixed indemnity products
Employers seeking to provide some health insurance for part-time, seasonal or low-paid hourly employees, have fewer options than ever. The "mini-med" that provided low-cost and low-limit co-insurance group medical insurance is mostly dead now, thanks to health reform.
However, there are still some options to meet employer needs to provide some supplemental health benefits for employees.
"There's certainly been a slowdown in the traditional limited medical benefit market," explains John Duczak, benefits producer and vice president of The American Worker, Inc., in South Barrington, Illinois, an employee benefits agency that specializes in high deductible health plans, limited medical plans and voluntary benefits.
"For many years, the biggest interest in these plans was from the large group marketplace, employers with 5,000 or more lives, with a lot of part-time and seasonal workers. But since health reform began to kick in, they aren't looking anymore."
The mini-meds, also called "co-insurance plans," featured small annual benefit limits of $5,000 to $25,000, but often first dollar coverage for doctor office visits and preventive care. The low limits also meant lower premiums than major medical plans, making them attractive to the low-paid hourly employees. The plans also allowed policyholders access to other insurance benefits, including network discounts and better treatment by providers as "insured" patients.
However, health reform legislation which went into effect in September set loss ratio limitations and eliminated annual limits of coverage for group and individual health plans and other co-insurance features that were standard in the mini-med plans.
McDonald's Corp., one of the largest buyers of mini-meds for its part-time restaurant employees, led the initial fight against the restrictions, citing the success of its inexpensive but limited group health plan. In November 2010, McDonald's and about 100 other food industry employers received a special exemption from the health reform law to continue variations of the low-limit group medical plans for at-risk part-time, seasonal and lower-paid employees. Other exempted employers include Jack in the Box, and Darden Restaurants that operate Red Lobster and Olive Garden restaurants.
The exemption, however, lasts only one year for those employers that applied and does not allow insurers or their producers to sell new coverage of that type.
The new law allows only one alternative--fixed indemnity policies that provide specific cash payments for hospitalization, critical illnesses or specific treatments. Often called "hospital cash" plans, the fixed indemnity products are not covered by health reform because they were never intended to be group or major medical insurance.
<S>Fixed indemnity plans
The fixed indemnity products are finding new interest among some employers, but not the same large groups as the mini-meds, Duczak says.
"Large employers are sitting on the sidelines, waiting to see if some other alternative becomes available under health reform, but small to medium-sized employers are showing interest in the fixed indemnity plans, both as a way of supplementing the high deductible health plans they have been forced to provide as group health plan rates have increased, and as a benefit replacement for when group plans simply become too expensive."
Employers just aren't sure of what they will be able to do under health reform, he says. 'With rates going up for group plans, various restrictions under health reform and growing interest in wellness, they just don't know what the future of the benefit plan is likely to be."
Brian Robertson executive vice president of Fringe Benefit Group in Austin, Texas, a fixed indemnity program underwriter, agrees. Health reform is confusing and, at least in the short run, may lead to an increase in the uninsured.
"The co-insurance plans were very popular with restaurants, the staffing industry and big box retailers--all of which tended to have a low-paid, hourly transient work force that might not otherwise qualify or afford major medical health insurance," he says. "They gave employers and their employees a real alternative."
The health reform changes destroyed that alternative. "There is absolutely no reason for a company or person to go uninsured because of the volatility of the limited medical marketplace," he says. "Employers and brokers should be questioning the waiver process. For example, what if no exceptions are granted? And how will carriers handle the minimum loss ratio requirements? "
Robertson advises benefits producers not to wait and hope for a renewal of the mini-med concept.
"With so many questions unanswered--and with no definite timeframe for understanding when they will be answered--employers and brokers should make plans now to switch to a fixed indemnity supplemental benefit plan. We are still writing new business and renewing our current clients without any caveats on the plans related to government legislation," he says.
The fixed indemnity plans, which can be designed to pay up to $1,500 per day for hospitalization, are guaranteed issue and can be sold on an employer-paid or voluntary basis.
Robertson says they provide a substantial benefit for health costs and are easy to understand since the benefits are not subject to complex claims evaluation and analysis provider bills. The underwriter can also design programs that can pay fixed amounts for doctor visits, diagnostic testing and annual physicals.
Other supplemental health insurers, including Aflac and UNUM plan to continue to stay in the market with their fixed indemnity plans insurance products.
Aflac, based in Columbus, Georgia, has a long history in hospital cash programs. In a letter to shareholders, Aflac Chairman/CEO Dan Amos said, "It is important to remember that health care reform is intended to ensure that Americans of all ages and incomes are protected by creditable, comprehensive major medical health insurance. Aflac policies are not major medical insurance. Our products help you cope with daily living expenses and out-of-pocket costs associated with accidents or illnesses--costs major medical insurance was never intended to cover.
"Our policies pay in addition to major medical insurance. And because cash is always welcome in the event of sickness or injury, we know the protection Aflac offers will continue to be in demand. After all, Aflac is highly valued by citizens of Japan, a country that has long had a national health care system in place."
UNUM in Chattanooga, Tennessee, continues to market critical illness insurance that provides fixed benefits for individuals diagnosed with cancer and other critical illnesses and MedSupport, a product that pays fixed cash benefits for hospitalization and outpatient surgeries.
Duczak says the fixed indemnity programs are finding new markets among blue-collar workers such as plumbers, electricians, contractors. "Their employers realize that health benefits are among the most prized by their workers, but they cannot afford group major medical insurance.
"But they are willing to pay the affordable premiums for fixed indemnity products that can provide some contribution to health care costs."
The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.