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Despite Potential Prohibition, Matter of ‘Mini-Med' Insurance Plans Persists Via Waivers

The plans are attractive because they typically have low premiums—sometimes just $10 per month. But coverage limits can be as low as $1,000 annually, and some plans pay for just four doctor's visits per year.

March 6, 2012
Related Topics: Medical Benefits Law, Health Care Costs, Benefit Design and Communication, Health Care Benefits, Benefits
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Employers should be clear with workers about what limited health benefit plans do—and don't—cover in the event of a serious illness or accident, consumer groups are warning.

The warnings are a reminder that limited benefit plans—known as "mini-med" plans—are still legal because hundreds of employers and insurers have received federal waivers to continue selling them until 2014.

Consumer Reports magazine describes mini-med plans in a new report as "legal but inadequate," and even categorizes them as "junk" insurance.

But insurers and employers say mini-med plans provide some coverage to people who otherwise could not afford more comprehensive insurance.

The plans are attractive because they typically have low premiums—sometimes just $10 per month. But they also carry annual limits of far less than the $750,000 federal requirement under health reform this year.

Coverage limits can be as low as $1,000 annually. Some mini-med plans pay for just four doctors' visits per year.

"Mini-meds appeal to large employers in industries such as retail, food service and temporary staffing agencies who want to be able to tell their employees, 'I have something for you.' But in reality, these plans are extremely limited in their coverage," says Nancy Metcalf, senior program editor of Consumer Reports.

The American Cancer Society has been sounding the alarm over such plans for several years after hearing from newly diagnosed cancer patients that these policies don't cover expensive treatments.

"It's really important for consumers, including employers, to know what they are signing up for," says Erin Reidy, associate policy director of the American Cancer Society Cancer Action Network. "The key is knowing what you are getting into."

The 2010 Patient Protection and Affordable Care Act prohibited the sale of these low-coverage plans. However, the Obama administration has been issuing waivers to employers and insurers that let them continue offering these plans until 2014. At that time, insurance companies will be barred from denying anyone coverage based on a pre-existing condition.

More than 1,200 health plans covering 3.9 million people have received federal waivers to continue mini-med plans, according to Consumer Reports. The federal Centers for Medicare & Medicaid Services issued the final waivers for mini-med plans in January.

Some of these waivers cover multiple years. A total of 722 self-insured employers have received waivers to continue offering mini-med plans to workers, according to the CMS. Those employers include Arby's, Cost Plus World Market, Foot Locker Inc., Jack in the Box Inc., Jamba Juice Co., 24 Hour Fitness USA, Waffle House Inc. and Wendy's International Inc.

Additionally, 50 health plans have waivers to continue selling mini-med plans, including Aetna Inc., American Heritage Life Insurance Co., Cigna Corp., and BCS Insurance Group, which covers McDonald's Corp.'s hourly employees.

Insurers say that mini-med plans are an important consumer choice.

"For many seasonal, part-time and temporary workers, these types of plans are their only source of affordable health care coverage," says Robert Zirkelbach, spokesman for America's Health Insurance Plans, representing major insurers nationwide. "If employers are no longer allowed to offer these plans, many workers could lose the coverage they have today—breaking the promise that those who like their coverage can keep it."

McDonald's was the first employer to push back against the federal health care law's ban on mini-med plans for this very reason.

In December 2010, Richard Floersch, executive vice president for human resources at McDonald's, testified before a Senate committee that the fast-food giant has tried to find affordable options for its low-wage workers amid soaring health care costs. McDonald's did not respond to a request for comment for this story.

Also in December 2010, the U.S. Health and Human Services Department began requiring health insurers that sell mini-med plans to notify consumers in plain language that their benefits are extremely limited.

More disclosures will soon be required by insurers. Starting this September, insurers will have to provide consumers with a standardized summary of benefits description of services covered under each health plan offered, including mini-med plans. The federal government issued a rule on these descriptions in regulations released in February.

"That will go a long way in helping consumers understand what they are buying," says Reidy of the American Cancer Society.

But health insurers say that the new disclosure rules are onerous and costly.

"The final rule requires an almost complete overhaul and redesign of how information must be provided to consumers," says Karen Ignagni, president and CEO of America's Health Insurance Plans, in a written statement. "The short time frame in which to implement this new requirement creates significant administrative challenges that will increase costs and result in duplication because many plans are already developing materials for employers whose policies take effect October 1, 2012."

Rebecca Vesely is a freelance writer based in San Francisco. To comment, email editors@workforce.com.

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