The U.S. Department of Health and Human Services (HHS) recently issued rules imposing curbs on sales of new mini-med plans that appear to be likely to violate the new federal Affordable Care Act (ACA) restrictions on annual and lifetime benefits limits. Insurers that have received permission to continue offering mini-med plans have about 60 days to notify customers that the plans offer only limited benefits as shown below.
Mini-Med Overview:
Under the ACA, federal agencies have defined a “mini-med plan,” or “limited-benefit health plan,” as a plan that offers insureds $250,000 or less in total annual benefits. These plans are designed to help pay smaller, more common claims for medical services the majority of insureds tend to use the most, such as:
- physician office visits,
- minor accidents,
- short hospital admissions,
- lab & diagnostic charges, and
- prescription drugs.
Mini-med insurance plans are a stopgap for employee health care coverage as more employers cut back or completely eliminate health insurance from their fringe benefits, instead providing this minimal coverage plan is becoming more popular. The employee typically carries the entire premium cost for the plan, which is very cost efficient for the employer.
The ACA is set to ban lifetime health plan benefits limits in plan years starting in 2011 and restrict use of annual limits. For ordinary health insurance plans, the minimum annual limit will be $750,000 for plan years starting from Sept. 23, 2010, to Sept. 22, 2011. The minimum annual limit will increase to $1.25 million Sept. 23, 2011, and to $2 million Sept. 23, 2012.
The Affordable Care Act will ban use of annual limits in plan years starting in 2014, when a new system of health insurance exchanges is implemented to help individuals and small groups buy subsidized health coverage on a guaranteed-issue, community-rated basis.
How Does the ACA Apply then to Mini-Meds:
Mini-med plan experts say low-limit indemnity health insurance products, such as critical illness insurance and hospital indemnity insurance, fall outside the scope of the rules. The rules do apply to mini-med products sold as an alternative to major medical coverage.
HHS has granted temporary benefit limits rule waivers to about 200 mini-med plans for 2011 that will violate the benefit limits rules.
The National Retail Federation told a congressional committee today that limited benefit “mini-med” health insurance plans play an important role in making health coverage available to their industry even if they aren’t comprehensive.
“Limited benefit coverage fills an important need not readily replaced by the market or hard-pressed state Medicaid rolls and is, by definition, far less comprehensive but is also far more affordable than comprehensive health insurance,” NRF Senior Vice President and General Counsel Mallory Duncan said. Approximately 1.4 million persons are covered currently in limited benefit coverage.
Duncan’s Mini-Med comments were directed in a letter to Senate Commerce, Science and Transportation Committee Chairman John Rockefeller, D-W.Va., and reported in Insurance News Net magazine.
The plans were threatened by the passage of the ACA because they would be unable to meet a new medical loss ratio provision requiring that health insurance plans spend at least 80 cents of every premium dollar on paying claims for medical care rather than on profits, salaries or other administrative costs. However, HHS approved a one-year reprieve for Mini-Meds, saying they would receive special treatment in calculating the ratio for 2011. Officials will collect data on the plans and decide later how they should be treated in 2012 and 2013. In 2014, workers will be able to purchase full-scale insurance through new insurance “exchanges,” making the Mini-Meds obsolete.
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