Debunking the Myths of the Mini-Med Plan
By Derek Peterman
August 2006
Today, average health plans are predicted to exceed $7,000 per employee, per year. By 2010, those costs could reach $12,000 per employee. Additional research predicts that by 2050, health care spending in the U.S. could account for more than 25 to 35% of the Gross Domestic Product.
These skyrocketing costs are causing employers to consider not providing health insurance for their employees and, today, according to the U.S. Census Bureau, roughly 46 million people in the U.S. do not have health insurance. Eighty percent of these people have full-time jobs but can no longer afford the premiums.
Not providing insurance can have a dramatic impact on employee recruiting and retention, as 80% of employees consider benefits important to their decision to join or leave an employer. So how can employers provide these necessary health care benefits while controlling their costs? Offer a limited-medical-benefit plan, otherwise known as a "mini-med."
The mini-med has evolved over the years into a viable health insurance option for employers. However, there are still several myths associated with these plans from the past that are no longer the case.
The Not-So-Limited Benefit Plan
First introduced in the 1980s, the mini-med plan could be purchased with $1,000 in medical coverage for the year. This amount doesn’t go very far in health care today. One trip to the emergency room and you could blow the entire amount. You were also limited to about two doctor visits a year, not even enough for a healthy person.
Those who tried the plans found them weak and lacking substantial coverage. Today, mini-meds cover a wide range of benefits, including out-patient doctor or clinic visits (five to nine per year, depending on customization of the plan), in-patient hospital benefits, surgical, intensive care, anesthesia benefits, emergency-room benefits, private-duty nurses, wellness services, pharmacy benefits, accident medical and AD&D benefits.
Plans are so customizable that you can come close to providing a comprehensive plan for employees at half the premium. Mini-meds are not intended to replace comprehensive coverage, but they are a great alternative for employees with limited income that have either not had insurance in the past or those employees who are being priced out of their company-sponsored major-medical plans. Many companies are now offering a combination of both major-med and mini-med plans to better meet the health care needs of their workforce.
Not Just for the Part-Time, Hourly Employee
Initially, these plans were most popular with temporary agencies, fast-food and chain-store workers, but have since gained appeal to a wider array of individuals who work full-time but can’t afford the rising premiums. According to the Medical Expenditure Panel Survey from the Agency of Healthcare Research and Quality, in the first half of 2002, 60% of uninsured adults and 75% of uninsured children lived in a family with at least one adult full-time worker. Groups less likely to have employer-sponsored insurance include workers in smaller companies, minorities, young adults (ages 19- 24) and near-elderly working women with health problems.
For example, the real median household income, according to the Census Bureau, is $44,389. This income level typically means that families are living pay check to pay check and are watching their spending closely. These individuals need quality coverage to meet their day-to-day medical needs and many are willing to look at a limited-benefit-medical plan with a lower premium than a comprehensive plan but without the additional coverage that is not affordable to them. In years past, all employees from the CEO to the janitor were on the same plan. Today, companies are segmenting employee groups based on income levels and needs to provide them with options.
Typically, the higher the employee contribution is, the less likely employees are to enroll. This can be avoided as employers are making larger contributions to the mini-med plan. Because premiums are lower, employers can afford to contribute a larger percentage of the overall cost.
Physician Assignment of Benefits
Another mini-med myth is that physicians don’t accept them. In the past, employees may have been required to pay for services up front and file a claim for reimbursement later, but not anymore. In many cases today, plans have 100% assignment of benefits at the time of service. Combine strong
PPO networks with broad physician and hospital choice and mini-meds restore dignity to the health care process for many. Additionally, employees tend to seek medical services earlier, reducing absenteeism at work and their dependence on the emergency room as the primary care provider.
Utilization of Mini-Med Plans Is Limited
These plans are catching on at a rapid rate as employers struggle to restrain the rising costs of health insurance. Insurers estimate that nearly 1 million people have mini-med plans and many of the plans’ biggest sellers say business is growing at 20% per year. In fact, two health insurance powerhouses, Aetna and Cigna, acquired mini-med providers in order to enter this growing market.
According to a 2005 survey conducted by the Kaiser Family Foundation and the Health Research and Educational trust, about 20% of employers offer a mini-med plan. Large employers such as Target Corp, Choice Hotels, International Paper and ConAgra Foods have realized the value of such plans. Also, employers are seeing a rise in health care participation by offering a mini-med plan. For example, Ratner Companies, an operator of nearly 1,000 hair-salon chains with 14,000 stylists, had a 13% participation rate in its comprehensive medical plan. Once the mini-med option was provided, participation jumped to 70%.
Debunking the Myths
A regional manufacturing company, struggling with the ever-increasing costs of health care, saw participation decline from 70% to less than 30% in the past few years. By offering this segment of the workforce an affordable mini-med option, the employer was able to contribute 80% of the premium, reduce the overall health care costs and increase participation levels across the board. Participation levels rose to more than 85%. Overall the employees are much more satisfied with their benefits package and the company is now covering a larger percentage of its employees with coverage that fits their needs -- at a cost the company can afford.
Mini-med plans are fast becoming a mainstream health care offering, and over the next three to five years the industry is expected to reach $3 to $4 billion in annual premiums. These plans are a way to bridge the gap of the full-time uninsured and get the U.S. closer to addressing our cost crisis in health care.
Debunking the Myths of the Mini-Med Plan
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