America's Health Trends
A Mini-Med Primer for
Brokers and Clients
Straightening Out the Confusion Over
Mini-Meds and Fixed Indemnity Plans

by Tim Adkisson

More businesses will be exploring alternatives to traditional major medical insurance as healthcare costs continue to rise and companies feel increased pressure to cut expenses. For many employers, the alternatives will include limited medical benefit, such as fixed indemnity group products.

These products offer a less expensive option than more comprehensive coverage. They provide medical benefits on a more limited scale for employees. However, a limited medical benefit is not a one-size-fits-all solution. There are two primary types of limited benefit plans that provide medical benefits -- mini-med plans and fixed indemnity or payment plans. While each plan type has its place in serving the needs of employees, it is important to understand the key differences and why one may be more appropriate in certain circumstances.

What is a Limited Benefit Plan?

Limited benefit medical insurance policies generally provide benefits for routine services and preventive care -- things like doctor visits, prescriptions, and emergency room visits. They are often suitable when major medical plans are impractical or financially out-of-reach for the employer and when uninsured workers can’t afford more comprehensive coverage.
It’s important for brokers, employers, and plan participants to view these plans though a different lens than with major medical. The benefits are not as extensive. While the amount of coverage is limited under these plans, they do offer some level of benefits to help employees gain access to the doctor.

Mini-Med Policies

Mini-med plans are expense-based benefits that often share the look and feel of major medical plans. In some cases, they may provide richer benefits than do fixed indemnity plans. Like major medical, they focus on in-network care; they include co-pays and deductibles; and they may include clauses for preexisting conditions. However, unlike major medical, they lack catastrophic coverage and have annual caps on in-patient and out-patient benefits.

The similarities to major medical plans can make mini-meds easier to understand for groups that are losing a comprehensive plan. But it can also lead to confusion when employees reach their coverage limits. Typically, there is an annual coverage limit as well as coverage limits for each benefit component. The policy’s annual level maximum may actually be lower than the sum of the individual components. So a plan participant may use up the annual maximum unexpectedly while coverage still exists under the coverage limit for an individual component.

With mini-meds, separate deductibles may apply to each of the plan’s benefit categories (for example, outpatient, inpatient, accident). Some policies have a prescription deductible that is separate from the out-patient deductible. Before the accident benefit it paid, some policies may require the out-patient deductible, the in-patient deductible, or both to be met. This creates a tangled web of competing deductibles, which can lead to confusion and higher out-of-pocket costs than originally assumed. Also, because they are expense-based, these mini-med rates are more susceptible to inflation. The presence of co-pays and deductibles may also be financially difficult for certain employees.

Fixed Indemnity Policies

Fixed indemnity policies are not expense based. They pay a fixed benefit regardless of the actual cost of service. While they may offer fewer overall benefit amounts than mini-med plans, their lower cost and design flexibility make them appealing to those who did not have insurance coverage in the past, want to reduce their overall medical costs, or want to supplement a major-medical plans to reduce the effect of high deductibles for their employees.

Fixed indemnity plans can be easier for newly insured employees to understand. For example, an employee who goes to the doctor will receive a fixed, known benefit, regardless of the actual expense. And because benefits are fixed, rates remain stable and are less affected by inflation. Also, there are no pre-existing condition clauses, no out-of-network penalties, and generally no co-pays or deductibles.

However, fixed indemnity plans are fundamentally different than traditional major medical plans. So they can be hard to understand for new clients or employees who have had major medical and are used to co-pays and deductibles. The benefits may appear too limited. They can also be confusing because the dollar amount is per-event, not an overall limit. The patient may not know how much doctor’s office visit costs until after they get treated.

A key value to fixed indemnity plans is design flexibility. Plans can be tailored easily to group demographics. For example, let’s look at a ski resort that wants to cover seasonal lift operators. Rather than loading up on preventative options, the resort may look at hospitalization, accident, and surgery benefits, which may be their most common claims experience. When choosing a fixed indemnity plan, it’s important to look at who the people are in the group, what they are most likely to use, and where they would find value.
So Which Plan is Right?

It depends on the client, of course. Mini-med plans more closely resemble comprehensive medical plans and may offer more benefits at higher premium levels. They are especially attractive to employees who recently lost access to a comprehensive major medical plan. But it is important for employees to understand the caps and limitations that lie under the surface of mini-med plans.
Fixed indemnity plans may be a better option for clients seeking lower premiums. These plans help clients get the most benefit for their dollar since the plans can be customized to fit the client’s needs. Fixed indemnity plans can also be available on an hourly platform, which may be particularly beneficial for employers that have hourly, part-time or seasonal workers.
Mini-Med Features

• Reimbursement-based benefits.
• Co-pays and deductibles.
• In and out-of-network co-insurance.
• Preexisting exclusions.
• Coordination of benefits.
• Annual cap on inpatient and outpatient benefits.
• Deductibles may apply to each coverage.
• Contract level annual cap on benefits.
• May have indemnity aspects.

Mini-Med Pros and Cons
• Often easier to understand for groups losing major medical given similar characteristics.
• Emphasis on in-network care.
• Can provide richer benefits.
• Co-pays and deductibles may be barrier to utilization.
• Internal limits and caps may be reached quickly.
• Rate is more susceptible to inflation.

Fixed Indemnity Features
• First dollar/pre-determined fixed payment benefits,
regardless of the expense.
• No co-pays or deductibles.
• No required networks.
• No preexisting condition exclusions.
• Coordination of benefits not required.
• Guarantee Issue.
• Paid per visit with calendar year maximums.

Fixed Indemnity Pros and Cons
• Easier for the uninsured to understand.
• Plan design can be tailored to group demographics.
• Rate is less likely to be affected by inflation.
• No out of network penalty in the plan design.
• May be harder for decision makers to understand because they’re used to co-pays and deductibles.
• May be harder for employees losing major medical to understand the difference.
• Benefits may appear too limited.
• Claims submission may be manual.
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Tim Adkisson is national sales VP for Select Benefits Distribution, Group Division at Symetra Life Insurance Company. Symetra sells employee benefits, annuities and life insurance through a national network of benefits consultants, financial institutions and independent agents and advisors. For more information, visit www.symetra.com or email grplif@symetra.com.