A Case For Limited Medical

Benefits Selling Magazine – Published 8/1/2010

It seems many believe the Patient Protection and Affordable Care Act is the death knell of all limited benefit medical plans. Not true. The new law does trigger the phase-out of certain types of limited benefit medical plans — often referred to as “mini-meds” or “expense-based plans” — due largely to the prohibition against annual limits within group health plans. However, many fixed-indemnity limited benefit medical plans are not affected by PPACA because they represent a different category of product.
A well-vetted, fixed-indemnity product continues to serve an important market niche and should be part of any broker’s portfolio. Here’s why:

1) Whether expense-based “mini-meds” will continue to be available for new business and renewals remains to be seen. The U. S. Department of Health and Human Services indicates annual limits cannot be less than $750,000 as of Sept. 23. This, in theory, would put mini-meds out of business.
HHS has also said, however, that insurers and employers who wish to postpone compliance can attempt to “win permission” from the federal government. How this will play out is unknown.
If limited group health plans do go away, employee groups covered by them will need a quick, effective alternative. Brokers with limited benefit medical clients should make sure they are affiliated with sustainable programs. If not, they should move their clients to product platforms that comply with the law in the near term and that can transition as future benefit strategies develop.

2) While employer benefit coverage strategies will continue to evolve, it appears that the need and opportunity for supplemental offerings is likely to grow. Quality, flexible fixed-indemnity limited benefit medical plans can help address immediate needs, but most importantly, they can be a key tool in helping employers build comprehensive health care coverage strategies.

In theory, PPACA “mandates” comprehensive coverage for all by Jan. 1, 2014. But the term “mandate” is somewhat misleading. Compliance requirements apply principally to the plans themselves. Insurers must satisfy myriad provisional requirements to continue offering their products. Employers, on the other hand, must “play or pay” — they are not mandated to provide coverage. Similarly, individuals are not required to buy coverage. Non-compliance for both employers and individuals, however, will result in financial penalties.
In other words, while carriers must comply with the rules for product provisioning, employers and individuals will continue to make benefits and health care coverage-related decisions that are in their best interests. Employers will evaluate their options within the context of their business philosophies, employee relations concerns and economic realities. Individuals will make their health care coverage choices based on personal need and financial situation. At the end of the day, insurers will do what they have to do, as will employers and individuals.

For many employers, PPACA represents business as usual. Other employers need help determining the best approach going forward. The opportunity for benefit consultants and brokers is clear. Employers without plans that meet PPACA requirements will look for a trusted adviser to provide ideas and options. The task is to understand each client’s circumstances and business goals. With that knowledge, combined with an understanding of the legislation, you can develop an array of options and facilitate next-step strategies.
For employers who are not in compliance with PPACA, it all starts with a single question: What is the lowest-cost approach to meeting the “play” requirement? Knowing that, you can then begin to define the eligible population to meet affordability limitations or enrich a plan to meet additional benefits offering objectives.
Options might include:
• A high-deductible, high co-insurance plan. A health reimbursement account, a health savings account, a limited medical plan to fit below the deductible, or a combination thereof, may make sense. High-deductible options also help create more cost-conscious health care consumers.
• Limited benefit medical configurations that supplement a primary plan. When considering supplements, think critical illness, hospital supplement or accident coverage. It is important not to undermine important cost-containment elements of the primary plan, such as by offsetting office visit co-payments.
• A limited benefit medical plan with high limits as the primary plan. This approach gives employees a reasonable option of electing catastrophic-only coverage on their own.
• A limited benefit medical plan with low or modest limits as the primary plan. This gives employees the option of electing a high-deductible plan on their own.
And, of course, another option is to provide different benefit offerings based on various employee classifications, such as job category, tenure and hours worked. There are fixed-indemnity-style limited benefit medical products in the market today with flexible architecture, low participation requirements and broad eligibility rules that can be structured as voluntary, employer-paid or shared-cost offerings. With them, you can create a variety of coverage scenarios to meet the goals of the employer and the expectations of different employee groups within the company.
Employers do not have to do it all. Many cannot; others simply won’t. As you work with your clients, keep in mind the continued opportunity for fixed-indemnity limited benefit medical plans to help bridge the gap and prepare for the new medical benefits era set to begin in 2014.

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