Wednesday, September 15, 2010

On "Mini-Med's" and Clarity

This month's issue of Employee Benefit News (an industry publication) has an interesting article on so-called "mini-med" plans, and their role (and rules) under ObamaCare©. We've written extensively on these plans previously, but what I learned yesterday offers a somewhat different perspective.

The first thing I learned is that, as Inigo Montoya might say, "this term 'mini-med:' I do not think it means what you think it means." You see, I've been using the terms "mini-med" and "limited benefit" interchangeably, but they are not necessarily the same thing. According to John Ferguson (President of South Carolina-based BasicPlus Insurance Services), a "mini-med" plan may include deductibles and co-pays, and even co-insurance ("80/20"), while a "limited benefit" plan pays a fixed benefit for specific services (a $40 reimbursement, for example, for a doctor's office visit). While these may not seem like significant distinctions, they are treated very differently under ObamaCare©.

As we've mentioned, one of the new regulations is that policies may no longer have lifetime maximums or internal benefits caps. That's a problem for the "mini-med" plans, which are generally priced much lower than a "regular" major medical policy because the carrier has a much more limited exposure. Under ObamaCare©, though, those caps become problematic:

"So-called mini-med plans that provide bare-bones health care coverage at an affordable rate to mostly blue-collar and entry-level workers, as well as part-timers, temporary staffers and seasonal employees, were nearly- given a death sentence under health care reform." What saved them (for now), is that the carriers which offer them can apply for a temporary waiver; according to Mr Ferguson, Allstate and Cigna have both applied for, and been granted, that reprieve. The problem is that these waivers are only good for a year, so next year they'll have to re-apply.

The other major problem facing "mini-med" plans is that, starting January 1st, they'll be subject to another ObamaCare© sandtrap: MLR. The "Medical Loss Ratio" is a (dubious) metric which requires that a carrier pay out at least 85% of its revenue in claims. We'll debate the merits of this requirement in another post, but suffice it to say that it will be exceedingly difficult for a "mini-med" carrier to meet this requirement. One industry rumor has it that carriers will combine various "lines of business" to meet this goal.

Which brings us back to those "limited benefit" plans. Unlike the mini-med, limited benefits plans aren't subject to the most egregious elements of ObamaCare©, including the onerous MLR requirement. Mr Ferguson believes, and I tend to agree, that these types of plans will be much easier to market under the new regimes.

One final note, somewhat off-topic, but related: There are a spate of both mini-med and limited benefit plans which tout themselves as "HIPAA Compliant." The implication of this claim is that a limited benefit or mini-med plan will be considered "Creditable Coverage" for folks obtaining new group health insurance (assuming group insurance survives, which is not a given). This is at best misleading, and at worst untrue: there is no magic wand that one carrier can waive that will obligate the next one to recognize a given plan's portability. If you see this phrase on a sales piece, be very skeptical. If it's too good to be true...
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