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Will Obamacare really stop mini-med health plans?

Next year, America's health insurance landscape will shift more dramatically than at any time in the nation's history.

New health care reform rules go into effect in January that require most Americans to buy health insurance. In addition, 2014 will bring changes intended to sound the death knell for "mini-medical plans."

mini medMini-medical plans offer basic health care coverage, but place dollar caps -- from as little as $2,000 to $10,000 or more -- on how much the plan will pay out in services each year.

Retailers, restaurants and other companies that hire low-wage workers have offered mini-medical insurance as a way to provide modest health coverage at a low cost to employees. 

Because coverage amounts are limited, policyholders typically pay relatively low premiums. However, they also must pay out of pocket for the cost of any medical services that exceed their mini-medical plan's annual cap.

For years, health care advocates have attacked mini-medical health insurance plans as inadequate.

Elizabeth Abbott, director of administrative advocacy at the California consumer advocacy coalition Health Access, calls mini-medical plans "junk insurance" and says they "offer almost no coverage for consumers who really need insurance."

Jim Duffett, executive director of the Illinois grassroots organization Campaign for Better Health Care, says employees who sign up for mini-medical plans do so because they have no other health insurance options available to them.

"People who have them are desperate," he says.

In 2014, new rules go into effect that prevent health insurers from placing annual caps on coverage. That change means the traditional mini-medical plan likely will disappear.

How Obamacare will affect mini-med plans

Originally, it was believed that health reform rules would cause mini-medical plans to go extinct well before 2014.

Reform legislation dictated that health plans issued or renewed after September 23, 2010, could not cap annual coverage limits at less than $750,000, with the threshold rising to $1.25 million in 2011.

However, some businesses -- most famously McDonald's -- balked at the rule. They contended that having to comply would result in dramatic premium increases. Some companies even suggested they might abandon insurance altogether, leaving workers with no coverage.

The Obama administration responded to these concerns by granting temporary waivers that allowed a number of mini-medical plans offered by businesses, unions and individual health insurers to continue for a few more years.

However, remaining waivers expire in 2014, when annual coverage dollar limits are prohibited in all health plans.

What it means for you

Some people who currently have mini-medical plans might worry about being forced into purchasing new, more expensive coverage.

However, such policyholders likely will get much better coverage through plans sold on the new health insurance exchanges that debut this October, says Cheryl Fish-Parcham, deputy director of health policy for Families USA, an advocacy group that promotes health care for all Americans.

"There won't be these dollar limits to their coverage that they have now," she says.

In addition, new government tax credits mean people with lower incomes may pay less for premiums than what they pay for their current mini-medical plan, Fish-Parcham says. 

Families USA estimates that nearly 26 million American will be eligible for such credits, including families of four making as much as $94,200.

People who don’t meet certain income thresholds will be ineligible for credits and may pay more for coverage next year than they currently do in their mini-medical plans. But Duffett believes the trade-off of paying more for better coverage is worth it.

"At least there is a benefit package that is going to be solid," he says.

By contrast, buying mini-medical coverage is like purchasing an old truck with 265,000 miles, no air-conditioning, and ball joints that are shot, Duffett says.

"It's a vehicle," he says. "But it's not a safe vehicle."

Return of the mini-medical plan?

Even though health care reform likely spells the end of the line for mini-medical plans, a new model is emerging that may restrict care for people who work at some large companies.

News outlets, including The Wall Street Journal and Politico, recently have reported that larger employers won’t be subject to new rules that require insurers to sell comprehensive health coverage to individuals and small businesses.

By contrast, bigger companies -- generally, those with more than 50 workers -- merely need to provide health plans that offer preventive care without annual or lifetime caps, according to the Journal. (Federal officials confirmed to the Journal that such plans appear to meet the minimum requirement for coverage under the law.)

The Wall Street Journal reports that a growing number of health insurance benefits advisers and brokers now are pushing larger companies to consider offering such pared-down insurance -- sometimes known as "skinny" health plans.

The result could mean employees at these companies will have coverage for basic preventive care, but will be responsible for the cost of major medical care, including hospitalizations and surgeries.

Duffett says he won’t be impressed by any company that decides to go this route.

"I think it's just a slap in the face to employees who are busting their butts for that company," he says.

If your company is among those considering switching to one of these plans, Fish-Parcham recommends raising a red flag.

"They may want to talk to their employer about this not being a good idea," she says. "At least some mployers will be sensitive to their employees' concerns."

If such lobbying fails to produce results, Fish-Parcham reminds you that the new health insurance exchanges will provide an alternative way for you to secure comprehensive care at an affordable price. 

Any employee of a large company who wants to buy coverage at a health insurance exchange is eligible to do so, according to a statement from the federal Centers for Medicare and Medicaid Services. However, in order to be eligible for a tax credit, your health insurance premium through your employer must cost more than 9.5 percent of your household income or the employer's health insurance plan doesn't meet the government's standards for providing a minimum value of coverage.

"Skimpy plans offered by employers may fail this second test," Fish-Parcham says.  

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