A relatively new, and controversial, workplace health insurance product, called a limited medical benefit plan or mini-medical plan, is increasingly being used by employers. This type of medical benefit plan is used primarily by “service” type businesses, such as retail stores, hair salons, and fast food restaurants. However, they are also increasingly being offered by a variety of employers, especially for temporary workers or freelancers. Nearly one million people are enrolled in such plans.
The controversy around limited medical benefit plans stems from the fact that maximum annual coverage limits are generally very low (e.g., $10,000 or $25,000) relative to the costs of health care for a major illness or injury. Some policies also have daily payment caps (e.g., $250 a day of hospital coverage), and do not cover major expenses such as surgery. Thus, underinsured workers with limited benefit plans are almost as vulnerable as those who have no health insurance at all.
Critics of limited medical benefit plans charge that they offer a false sense of security to workers, who are often unaware of the specific limitations of their health benefit plan until they get sick or injured. Having a limited benefit plan allows employers to state that they “provide health insurance” without actually securing adequate medical coverage for their workers, who are largely on their own in the event of a catastrophic illness, such as a heart attack or cancer.
The other side of the argument is basically “anything is better than nothing.” While these plans offer little or no protection for catastrophic illnesses and chronic diseases, they do provide coverage for preventative care at a price that workers with low and moderate incomes can afford. If someone lacks health insurance and is unable to get coverage through a spouse, parent, or other source (e.g., trade association), limited benefit plans may be an affordable alternative to going uninsured. The key factor is that beneficiaries must have a thorough understanding of the limits and coverage gaps of the plan.
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