So-called mini-med plans that provide bare-bones health care coverage at anaffordable 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.

But an interim final rule restricting annual benefit limits gave the product a reprieve through 2014 when state-run insurance exchanges are slated to take effect.

It's anyone's guess what will happen to the plans after that time. There's also uncertainty as to when the Department of Health and Human Services may issue guidance on the scope and process associated with applying for a waiver from requirements relating to these restrictions.

The rules seek to steer more health care premium dollars to medical care and away from expenses.

Mini-meds largely appeal to employees who would otherwise receive government assistance. It's estimated that anywhere from 1.4 million to 2 million Americans receive such coverage.

Some of the companies they work for include McDonald's, Waste Management, Dollar Tree and the Hair Cuttery, as well as thousands more across all size categories.

Angst across America

Gaylord Entertainment Company in Nashville, Tenn., is one such firm that has positioned these products as an important part of its overall benefits strategy.

"We have found our employees are receptive to the mini-med concept and its purpose," says Shawn Smith, director of benefits for the hospitality and entertainment company, whose brands include the legendary Grand Ole Opry country music showcase.

Enrollment in Gaylord's mini-med plan, which was introduced in 2006, more than doubled to more than 200 participants with an assist from Phoenix, Ariz.-based Ternian Insurance Group LLP, whose founders are credited with helping pioneer the concept.

Smith explains that the eligibility pool was extended beyond 743 traditional part-timers to included 1,294 "on-call" staffers who work long hours, mostly for special events, on an as-needed basis, depending on hotel occupancy and, thus, demand for their services (many are banquet servers). The company also employs 5,226 full-timers.

"The ability to offer something across all statuses, including our seasonal workers, is a huge competitive advantage and says a lot about Gaylord's culture," she adds.

But industry observers, particularly brokers and advisers, fret that the road to health care reform will pave over these gains.

Ray Burett, a principal with the Lake Group in New York, which is part of the United Benefit Advisors network, can't help but worry about two employer-clients with mini-med plans, both family-owned and in the nursery business, who usually hire about 1,000 seasonal workers between March and October to assist their respective workforces of roughly 100 full-time employees.

"Many of them earn slightly north of minimum wage and have never seen a doctor," he reports. His fear is any penalties that these firms might incur in connection with the seasonal workers eventually seeking coverage from government exchanges, since they would qualify as full-time employees, could put them out of business.

Burett also laments the competitive stakes of a Long Island manufacturer with more than 300 workers who make door hinges, knobs and accessories for upscale office buildings, hotels and expensive homes.

After an attempt to offshore this work to China, the company brought back its operation to the U.S., and he believes "they're going to be in a tough place," despite doing their part to remove working Americans from Medicaid rolls.

Basic coverage

Mini-meds can serve as a sturdy bridge to coverage for high-turnover employee populations that could quit their jobs and qualify for COBRA just days after their waiting period is up and, in the process, spike costs without putting in any sweat equity.

The plans have been around more than 10 years and, depending on the source of information, could date back as far as the late 1980s. The number of insurance carriers serving the market has swelled to more than 30 from just three in the industry's salad days.

Many mini-med plan designs pay for various health care services based on a fixed benefit indemnity amount. Monthly premiums range from $20 to $190 for single coverage and $100 to $500 for families.

About 90% of the time, they're offered on an employee-pay-all voluntary basis to those who don't have access to traditional health insurance.

They typically pay for visits to a doctor, as well as the ER for accidents, outpatient diagnostic lab work, X-rays, prescription drugs with a discount card and wellness benefits.

Sometimes the policies are offered with deductibles or copayments, while plans may or may not require pre-existing condition limitations and guaranteed issue.

Dave Evans, senior vice president of the Independent Insurance Agents & Brokers of America in Washington, D.C., known as the "Big I," cites the www.limitedmedicalbenefits.com Web site as a robust mini-med resource that features a comprehensive online directory of industry players and annual conferences.

Ternian President Ben Rozum notes that mini-med plans are often used interchangeably with limited-benefit medical plans because there's no established industry standard definition.

Earlier in the year, Ternian issued an analysis of how health care reform might affect these plans and was sanguine that its product offerings would remain a viable option.

Indeed, supplemental medical products are expected to play a significant role filling gaps created by qualified health benefit plans in a post-reform climate.

While the stage is set for substantive changes in the way health care is delivered and paid for, it's no secret that the Obama administration views mini-med plans as providing purely catastrophic coverage and failing to meet the minimum standards of health care reform that constitute an "essential" benefits package, according to Joel Kopperud, a director for congressional relations at the Council of Insurance Agents and Brokers in Washington, D.C.

Employers and their producer partners are trying to get a better handle on how mini-med plans fit the definition of "essential benefits" under the new health care law. Whatever the government determines to be minimum essential benefits in the state-run exchanges is what he believes will eventually replace mini-med plans.

"Once the exchanges are built, people who have mini-med plans will be sent to the state exchanges to purchase their insurance, where there will be a requirement of a certain amount of benefits that they'll have to have," predicts Kopperud, who met with HHS staffers to push for an exemption of the plans from the interim final rule on annual dollar limits.

The use of annual dollar limits that insurers pay for health care will be phased out until insurance exchanges under the Patient Protection and Affordable Care Act are made available for lower-income working Americans in search of more affordable choices, and such caps are banned for most plans.

Employers and insurers must obtain permission from the federal government to delay compliance with these rules by demonstrating that their annual limits are necessary to prevent a significant loss of coverage or increase in premiums. The restricted annual limits seek access to medical services with a minimal impact on premiums.

"The law's new consumer protections will bring relief to many Americans and provide peace of mind to millions more who are only one illness or accident away from medical and financial chaos," according to an HHS spokeswoman.

But Evans calls the government's treatment of mini-med plans akin to firing a shotgun at a mosquito, noting that the concept "is obviously not the same product as major medical."

The sentiment among lawmakers and regulators was that too many health insurance premium dollars were being spent on policy expenses, including sales costs, and not enough on medical care.

The minimum medical loss ratio for traditional health insurance plans stands at 85% for individual and small groups, and 90% for large groups, Evans explains.

The highest required threshold he was able to find was 75% in New Jersey. "It doesn't take a genius to figure this is a dramatic leap versus what's been on the books in terms of the individual states and what they require per rate file," he observes.

Kopperud notes that by issuing the interim final rule on annual dollar limits without gutting mini-med coverage before the exchanges take effect in 2014, the federal government agreed to buy the concept a few more years before seriously clamping down. "I think HHS just kicked the can down the road," he says.

Burden of proof

The burden of proof on employers and carriers in the next few years, beginning on September 23 when the first round of reforms take effect, will be to argue that without mini-meds, all of their employees would lose coverage or premiums would be rendered unaffordable, Kopperud explains. "But it's just a cumbersome process, and weird that they didn't allow them to exist until the exchanges are built," he adds. "On the one hand, it's almost a win-win for both the administration and industry."

The fact remains that mini-med plans rank as a low priority among lawmakers and regulators. "Unfortunately, mini-med is the tail on the dog," Evans says, "and so while there's certainly a group of interested people, the major hue and cry among the average legislator is with what are Medicare and Med "There has been an appetite for these products," he observes, "and we hope that they are not taken off the menu under the guise of health care reform."

Limited guidance offered

On June 28, 2010, the Departments of Health and Human Services, Labor, and Treasury publisshed a new Interim Final Rule (or Regulation) addressing several provisions of the Patient Protection and Affordable Care Act (75 Fed. Reg. 37188).

The new Regulation includes requirements related to preexisting condition exclusions, annual and lifetime dollar limits, rescissions, choice of providers, and coverage of emergency services.

In what the agencies characterize as a "three-year phased approach," the Regulation provides that, prior to 2014, a plan may establish an annual limit on the dollar amount of benefits that are essential, provided the limit is at least:

* $750,000 for the 2011 plan year (which begins on or after Sept. 23, 2010, but before Sept. 23, 2011)

* $1.25 million for the 2012 plan year (which begins on or after Sept. 23, 2011, but before Sept. 23, 2012)

* $2 million for the 2013 plan year (which begins on or after Sept. 23, 2011, but before Jan. 1, 2014)

The Regulation provides that, before January 1, 2014, the Secretary may establish a program to waive annual limits for a plan that has annual dollar limits below the restricted annual limit amounts above if compliance with the new limits "would result in a significant decrese in access to benefits under the plan or health insurance coverage or would significantly increase premiums for the plan or health insurance coverage." The Preamble indicates that HHS will issue guidance on the application process in the "near future."

According to the Preamble, the waiver program would be established so that individuals with certain coverage, including coverage under a limited benefit or so-called "mini-med" plans, would not be denied access to needed services or experience more than a minimal impact on premiums.

Source: Groom Law Group.

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