Published September 11, 2012
The rising price of health insurance has consumers looking for ways to reduce costs and some consumers and employers are turning to mini-med insurance plans to get affordable coverage, but some experts say these plans offer little or no coverage if you become ill.
Mini-med plans are typically offered by retailers to employees, but are also available on the individual market and through large group plans. The plans offer minimum and capped befits like how many times you can visit a doctor and limit the type of doctors you can see.
“They are relatively cheap because they do have annual limits on the benefits and/or have limited benefit coverage,” says Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network. “They don’t provide very good coverage if you incurred a significant medical condition like cancer.”
The Affordable Care Act prohibits health plans from having dollar limits, but the government has issued waivers to some companies until 2014. Ruby Tuesday was issued a waiver and offers a mini-med plan that has an annual limit of $10,000. Since a stay in the hospital can cost $1,853 per day on average, according to restaurant chain, its plan would only cover a five-day stay. The plan costs $18.83 a week for $1,250 in annual outpatient care and $3,000 in inpatient hospital care. The cost decreases to $7.00 a week after six months of service.
Mini-med plans are able to thrive in the marketplace because they appeal to individuals with little money to spend on health insurance but want access to quality health care. What many consumers don’t realize when buying a min-med plan is that often the coverage isn’t enough to cover a long-term illness or medical care.
“Consumers have to know it’s not the same as comprehensive medical insurance,” says Minnesota Department of Commerce Commissioner of Commerce Mike Rothman. “Often times marketers use language that is confusing. People don’t understand what they are buying.”
Mini-med plans may be a useful low-cost alternative for people that are at lower risk of getting sick, but for most Americans it won’t be enough. “Individuals need to look at the extended coverage and restrictions and determine if it makes sense given their current and expected health needs,” says Finan.
The future of these plans is unknown under the Affordable Care Act. According to Rothman, while the marketplace for health insurance will change in 2014, what is being sold will vary from state to state, which means mini-med plans could be abolished in some states and allowed in others.
Rothman says many mini-med sellers will solicit would-be customers through telemarketing, faxes and other direct marketing tactics that hype the low cost of the plans. But before consumers even consider buying one of these plans, Rothman warns understanding what will and won’t be covered.
One way to gauge if the plan is worth the cost is to ask for the medical loss ratio, which is the percentage of the premium dollars that goes back to the enrollee in terms of medical benefits. Finan says if the medical loss ratio is below 80% to 85% than it’s not a good value for the dollar.
When a consumer gets a solicitation for a plan, Rothman suggests to get the full name of the insurance company that’s selling the product and the insurance agent’s information and to check to ensure the agent is licensed. It’s also important to get documentation of what is being covered and full explanations of limits on the plan.
“Often times what’s being sold is short of insurance and they are calling it insurance or coverage,” says Rothman. “We want to make sure that consumers stop and check and make sure they understand what they are buying.”