Providing affordable employee health insurance is tough for many small companies and those employing lots of part-time workers. If that sounds like your organization, it may be time to consider offering a “mini-med” plan that covers limited health care expenses at a relatively low cost.
Here’s what you need to know about how mini-meds work:
1. Mini-meds are more limited than major medical plans and typically do not cover catastrophic care. Mini-med plans cover basic medical services, such as a limited number of doctor visits per year and prescription medicines, but max out each year at levels as low as $5,000 to $50,000. They may severely restrict hospital stays and even diagnostics such as X-rays.
2. The plans usually offer coverage limits as low as a few hundred thousand dollars. They have low deductibles and manageable premiums—both appealing to lower-income employees—but they leave workers on their own in cases involving major illnesses. For most, that’s enough: The American Association of Health Care Consultants estimates that 85% of employees file fewer than $1,000 or less worth of health insurance claims each year.
3. Mini-meds have taken off over the past three years. Their rise has coincided with employers’ struggles to control employee health care costs by shifting more of the financial burden onto workers in the form of higher co-pays, deductibles and annual premiums. It’s likely that limited medical plans will shake up the health insurance industry over the next few years.
Better than nothing?
“Some employers think they [mini-meds] are better than nothing,” says Blaine Bos of the benefits consulting firm Mercer, which has released a study on employer-sponsored health benefits.
One of them is the outdoor equipment retail co-op REI. The company recently began offering a mini-med plan to its 4,500 part-time, seasonal and temporary workers. Participants get $10,000 in benefits, an amount the company based on a study that revealed 89% of the claims handled through its traditional major-medical plan cost less than $5,000.
An REI spokeswoman says more than a quarter of the firm’s eligible employees have signed up for the plan.
Other organizations offer mini-meds to new hires waiting to become eligible for major-medical insurance plans. Many of those employees work in jobs with high turnover rates—and for employers that have extended major-medical waiting periods from 60 or 90 days to as long as two years.
Critics call mini-med plans inadequate because they don’t cover catastrophic expenses.
Balance mini-meds against traditional health insurance
Are mini-meds right for your organization? Employers paid almost $8,000 per employee to provide health care last year, an amount that led some organizations—particularly those with fewer than 200 workers—to drop their health care coverage altogether.
They did so at the peril of their recruitment efforts, as health insurance is among the top benefits employees value when they consider job offers.
Plus, predicts Mercer, the number of part-time employees is sure to continue to grow, which means recruitment of traditionally noneligible workers is likely to hinge on benefits, including health insurance.
About 62% of large employers cover part-time workers, according to Mercer research.
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