BENEFITS BUSINESS
Mini-med plans allow employers to offer coverage
to low-paid and temporary workers
By Len Strazewski
"Major medical insurance is one of the great perks of employment ... but it doesn't come with all kinds of employment. ... Many hourly employees ... are simply never offered health insurance--and may not have any coverage at all."
--Janis Russell, Vice President, The Fletcher Group, Holiday, Florida
Demographers call them the "working poor," individuals who hold steady, low-paying jobs that keep them hovering just above the poverty level. Many can barely afford housing and food for a family. Few rate employee benefits.
For these American workers, some health insurance coverage is better than none, says Janis Russell, vice president of The Fletcher Group, an independent agency in Holiday, Florida. But for more than 40 million working Americans, "none" still describes the amount of coverage they have.
And that is a moral and professional concern, says Russell who specializes in building employee benefits programs for companies that employ part-time and temporary workers and for temporary employee leasing agencies. These companies provide a unique opportunity for agents, who understand the needs of the temporary and low-paid workforce, she says.
"Major medical insurance is one of the great perks of employment," notes Russell, "but it doesn't come with all kinds of employment. Many Americans don't realize that as much as 80% of working Americans are not covered by traditional health insurance. Many hourly employees, part-time employees, seasonal workers and lower-paid workers in restaurants, retail stores and manufacturing are simply never offered health insurance--and may not have any coverage at all."
The explosion of high-tech companies contributed to the problem, she adds. Entrepreneurial firms founded on an idea and shoestring budget never planned on expensive major medical plans--and if they survived the "dot-com" bust of the past two years, they have left thousands of workers desperately hanging onto their jobs--without insurance.
Russell offers an alternative to many of her commercial insurance clients who fit this mold--mini-med supplemental insurance that provides tiers of health and wellness benefits scaled to the hours and wage structures of workers who usually are not eligible for major medical insurance. She represents nearly a dozen insurers that provide these plans, including Select Benefits from SAFECO Life & Investments in Seattle, Pan-American Life in New Orleans and Affordable Healthcare from Aetna in Hartford.
The mini-med plans are not nearly as comprehensive as traditional major medical insurance, Russell explains, but they are also much less expensive and can provide a wide range of coverage opportunities that include hospitalization indemnity, doctor visit indemnity, surgical benefits and diagnostic tests. Some mini-meds can include dental insurance and vision care, as well as general medical coverage.
Many feature first-dollar coverage, no limitations for pre-existing conditions and no coordination of benefits, unlike most group major medical plans that include deductibles of $100 to $1,000 and restrictions on pre-existing conditions. The coverage isn't as extensive as traditional major medical plans, however. Most limit payments to a schedule of benefits and procedures and few benefits exceed $10,000 in indemnification.
Employers can offer them to employees on a payroll deduction basis and contribute to the premium on a scale according to hours worked per month.
There are vast differences among mini-meds," says Russell. "Plan terms vary greatly and it's up to an agent to match the appropriate plans to the needs of their clients."
However, Russell has some strong opinions about what terms agents should recommend to their clients. Even though cost-sharing features such as deductibles, co-insurance and pre-existing condition limitations may reduce costs for clients, she does not recommend them.
"Consider the workers who are being covered by these plans. Many of them struggle each month to pay their rent, provide food for their families and manage other life necessities. Deductibles and other coverage limitations do more than force them to share costs; they force them to reconsider accessing the benefit plan at all.
"If a worker has to choose between paying the rent and going to the doctor, you've given them no choice at all. If they have to pay the deductible, you have given them nothing. If you give a worker coverage he or she can never access, well, thanks a lot, Jack. Where's the benefit in that?" she says.
"Health benefits should be a reason to stay employed. They should pay in recognizable, practical health care activity. They should get Johnny the doctor visit and the immunization shots he needs for school. They should pay for a dental cleaning. They should encourage care, not be an impediment to care," Russell says.
Select Benefits from SAFECO is one of her preferred plans because of its flexibility and broad availability of coverage, which can include life and disability insurance as well as health indemnity, she says. The coverage is available to employers with 51 or more full-time employees and can be structured to include part-time, temporary or seasonal employees as well as leased employees provided by a professional employment organization (PEO).
SAFECO began offering the coverage in 1999, to appeal to the growing professional employment and temporary employment industries, as well as the wide range of employers who cannot afford to offer traditional major medical or managed care plans to all employees, says Bret Fredericksen, multiline group sales manager.
"Health insurance is one of the most expensive employee benefits offered by employers, and the costs continue to increase at an accelerating rates. Many employers choose not to offer health insurance because they simply cannot afford to pay all or a large portion of the premium.
"But many of these companies would like to do something for their employees, offer them some coverage opportunities and contribute something to their costs," he says.
The mini-med plan allows employers to control and determine their own costs, Fredericksen says. Employers can choose the coverages they want to make available to employees and base their contributions according to the numbers of hours worked by each eligible employee or pay a flat monthly rate for a minimum number of hours.
"Health benefits are a recruitment and retention tool, and even employers with a limited budget need to recruit and retain the best workers for the jobs they have. They realize that they must look to the needs of those employees with whatever resources they can provide," Fredericksen says.
Available coverages include life and accidental death and dismemberment insurance, dependent life insurance, hospital indemnity benefits, doctor's office visit indemnity, additional accident benefit, outpatient diagnostic laboratory and x-ray indemnity, surgical costs, prescription drugs and pharmacy discounts, preventative care, vision care and dental care.
SAFECO does not require medical underwriting or proof of good health for employees who sign up during open enrollment, does not demand coordination of benefits, and does not include limitations for pre-existing conditions. Participants are not limited to preferred provider networks; employees choose their own doctors.
"Most employers establish a core group of benefits and pay the whole cost for those benefits, allowing employees to buy up from a series of upgrade options," he explains.
Premiums range from $20 to $200 per month, depending upon the coverage chosen and the employer contribution. Rates do tend to increase on an annual basis, Fredericksen says, but increases average only about 5% per year, compared to 15% or more for major medical plans.
Select Benefits is administered by Sound Benefits Administrators of America in Ashland, Wisconsin. SAFECO acquired the third-party administrator in 1999, as part of its commitment to the mini-med market, according to Fredericksen. The administrator provides a single point of contact for policy administration and claims with toll-free telephone access.
"For our agents, the main difficulty in selling Select Benefits is educating the employer and its workforce on the program structure and its advantages. Employers need to be shown that they can provide some very practical, usable health benefits to their employees without necessarily committing to the escalating costs of traditional group health insurance," he says.
Russell of The Fletcher Group agrees. "Agents need to look to the workforce of their clients. If they have a large number of employees that do not qualify for major medical, workers that do not work enough hours or earn enough wages to pay for traditional health insurance, they are likely prospects."
These employers need to learn that they can provide something for their employees. And something is a lot better than nothing when it comes to health care.
The author
Len Strazewski has been covering employee benefits issues for more than 20 years and is employee benefits editor of Human Resource Executive magazine. He has an M.A. in Industrial Relations from Loyola University.