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The market for mini-medical plans is growing. Is such limited coverage really better than nothing?
It's not your father's major medical. It won't cover an operation, a serious emergency or long-term treatment of an unexpected major illness. But for less than half the cost of a traditional plan, it may cover prescriptions, a handful of doctor visits, some lab work, and a day or two in an in-network hospital.
"It's what I call 'fall out of a window or get bit by a dog' insurance," says Peter Ronza, SPHR, compensation and benefits director for the University of St. Thomas in St. Paul, Minn. Although his current employer doesn't use such policies, Ronza saw his share of "mini" health plans while working as a benefits consultant a few years ago. "Some of my clients in high-turnover businesses were interested in offering at least some sort of health coverage to be more competitive against other employers and to retain the staff they had. They saw these plans as an option."
The insurance products are known by an array of generic terms, including minimedical plans, limited-medical plans, limited-benefit plans and fixed-benefit plans. This genre of inexpensive health insurance helps employees with non-catastrophic medical expenses.
Around for more than a decade, these plans now constitute one of the fastestgrowing segments of the U.S. health insurance industry, particularly since health care costs have been rising rapidly. According to the Kaiser Family Foundation, U.S. health insurance premiums increased 87 percent from 2000 to 2006-four times more than wages.
How They Work
Under the terms of limited-benefit plans, the insurance carrier pays a defined amount for a defined number of medical occurrences each year, with pricing structures carefully negotiated with employers' specific needs in mind. Typically, the plans impose an annual cap of just a few thousand dollars on reimbursable health care expenditures, with no or low deductibles. Part of their appeal: the sense that they are "better than nothing" for companies with high staff turnover or many hourly and parttime workers.
Unlike major medical insurance, which typically has a lifetime coverage limit of $1 million or more, mini-medical plans have annual caps, generally in the $2,000 to $10,000 range. As caps increase, so do premiums, which begin at around $50...