Second look: High costs and insurer interest are reviving limited benefit medical plan reputation
By Karen Lee
Employee Benefit News
May 2005
In only a few short years, limited medical benefit plans have risen in perception from a status as low-selling bare-bones programs marketed by niche vendors to potentially viable solutions to today’s health care problems, including punishing health care costs and millions of working uninsured.
Large insurance carriers certainly have noticed the turning tide, and they do not want to miss out.
Indeed, the plans themselves do not come close to covering what a standard health care plan does. For example, a sample Aetna plan might have a relatively low deductible – $250 for an in-network provider, $350 out of network, and a low premium. However, it also has a $10,000 maximum benefit and a prescription drug card that covers a monthly maximum of $35.
Now, though, things have changed. Some states are considering rollbacks of the health care mandates that many believe are largely responsible for soaring health care costs.
The truth is, as health care experts continually point out, most people — even those who do not have high salaries – generate less than $1,000 in health care expenses per year, so insurers believe limited medical plans can take care of low-wage employees’ non-catastrophic expenses.
http://www.benefitnews.com/detail.cfm?id=7432
Today’s Los Angeles Times also addressed this issue:
http://www.latimes.com/features/health/la-he-insure6jun06,1,2827471.story
And…
bizjournals
May 23, 2005
House Speaker Dennis Hastert endorsed legislation to allow individuals to buy health insurance from any state, regardless of where they live.
The legislation would lower the cost of health insurance by allowing individuals to get around their state’s coverage mandates and pick a less-comprehensive plan, says Rep. John Shadegg, R-Ariz., the bill’s sponsor (H.R.2355).
http://albuquerque.bizjournals.com/extraedge/
washingtonbureau/archive/2005/05/23/bureau2.html
And…
H.R.2355 would require the following disclosure by the health insurance issuer:
Notice
This policy is issued by (health insurer) and is governed by the laws and regulations of the State of (primary state), and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of (secondary state), including coverage of some services or benefits mandated by the law of the State of (secondary state). Additionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of (secondary state). As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.
http://thomas.loc.gov/ (Enter H.R.2355 and check “Enter bill number”)
Comment: In the rush to provide affordable insurance options, the insurers are defeating the very purpose of coverage: providing financial security for individuals with health care needs. Aetna’s plans with a maximum benefit of $10,000 (or as little as $1000 maximum according to the Los Angeles Times) are almost worthless for catastrophic acute or chronic problems. This might provide adequate coverage for individuals who remain healthy and rarely access the health care system. But pulling large numbers of healthy individuals out of the risk pools that do cover high cost patients greatly compounds the funding problems for health care.
To cover the 20% of individuals who utilize 80% of our health care services would require an average of $26,000 per patient (a total of about $1.5 trillion just for this 20% of our population). An insurance policy providing adequate coverage for this group as an isolated entity would have to have a premium in excess of $26,000 per individual. Those who remain healthy but wish to have comprehensive coverage obviously would find these premiums to be unaffordable (the “death spiral” of health insurance premiums). Clearly the only way insurance can work is by diluting the costs by including all healthy individuals as well.
So what is Congress proposing? They would remove individual state requirements that do require that insurance pools truly dilute risk. They would do this by allowing permissive states to market worthless insurance products in restrictive states. Then comprehensive coverage would be unaffordable for almost everyone for the reasons mentioned above. So what would those with significant health care needs do? Well, that’s their problem, but at least now they would own their own health care.