More Employers Try Limited Health Plans
Cheap 'Mini-Medical' Policies Cover Drugs And Doctor Visits, But Little Hospitalization
By VANESSA FUHRMANS
Staff Reporter of THE WALL STREET JOURNAL
January 17, 2006; Page D1
Employers are increasingly turning to an affordable type of health insurance that has a big catch: If you get really sick, it won't cover your major expenses. These low-cost offerings, called "mini-medical" or "limited-benefit" plans, are catching on as employers struggle to restrain the rising cost of health insurance. Available as group plans or individual policies, they typically cover four to 10 doctor visits a year, a certain amount of prescription drugs and some lab work or other tests. Premiums can cost as little as $40 a month -- far less than the $148 average for a major-medical plan bought on the market or the $335 average cost of someone on a company health plan, according to the Kaiser Family Foundation, a health-care policy research group.
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Mini-medical plans have been around since the '80s, and until recently were sold mostly to temp-agency, fast-food and chain-store workers. But they're becoming more commonplace as employers cut back on full benefits, or turn more to part-time and contract workers. Mini plans are also starting to appeal to a wider array of individuals who might otherwise not be able to afford insurance, including the self-employed or freelancers. Sometimes individuals buy these plans through professional associations. This spring a coalition of 10 large employers so far, including Avon Products, International Business Machines, General Electric and Sears Holdings, will make a number of low-cost options, including limited-benefit plans, available to independent contractors and part-time and temporary workers not eligible for regular company benefits -- about 900,000 people.
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Critics say that consumers don't always understand the limitations of these policies. Most hospital care isn't covered, or the benefits may be doled out in small increments, requiring consumers to contribute big chunks along the way. Annual payouts are often capped at $10,000 or less, so policyholders are largely on their own if catastrophic illness, such as a heart attack or cancer, strikes... In a sense, the plans are the inverse of the "consumer-driven" health plans that many employers and policy makers are pushing today, which require patients to pay out of pocket for routine care but provide coverage for catastrophic needs. Insurance brokers say that some mini plans are being sold to people who have high-deductible, consumer-driven plans to cover catastrophic care and are looking for some coverage for everyday expenses. Layering the two types of plans together can still be cheaper than a traditional major-medical policy.
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Mini-medical plans cause more than their share of consumer complaints, say some brokers and state insurance regulators. Some critics worry that many customers are young people who might not fully grasp the plans' limitations, or individuals who are buying policies on their own without the guidance of an employer's human-resource department. Overeager brokers may also gloss over them to promote their "upfront" benefits, say consumer groups, and some brokers and state regulators.
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Write to Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com
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