“Mini-meds" - a panacea for small employers or an invitation to disaster?

November 2005 - Limited benefit plans (LBP), also known as 'mini-meds', are the fastest growing group insurance product in the nation, and may represent a gift from heaven for some employers in Colorado. For others, it may well be the kiss of death, since some plans can expose an employer to legal difficulties.

Limited benefit plans, not to be confused with 'stripped-down' group plans, have become popular because they can offer an employee their only opportunity for some type of healthcare insurance, albeit on a limited basis. These plans do not cover catastrophic illness and injury, and are not to be confused with group major medical health insurance with it's mandated benefits and high lifetime maximums. Indeed, mini-meds could very well be a 'gift' for those small employers with non-benefited, part-time, or 1099 independent contractors, due to their low costs. However, these plans could easily be misunderstood by employees and employers alike. Further, individual plans could be erronously marketed as 'super mini-meds', in order to overcome the limited nature of the benefit plan.

Under Colorado law, individual plans that provide for major medical coverage are 'illegal' for the employer, due to the requirement that employers offering health insurance via an employer sponsored plan must provide a group plan that meets all mandates for employer-provided small group indurance in Colorado, including maternity. Individual plans that are marketed as mini-med plans to get around the limited nature of mini-meds would expose the employer to potentially catastrophic litigation, due to the requirement that manadated benefits, such as maternity, be included.

Mini-med plans can be successfully marketed to employees, since they are not major medical plans, or even cover hospitalization. This is an important distinction. The biggest drawback to mini-meds are the plans themselves; even so, employers are looking for ways to attract and retain employees in today's tight job market. LBP's are designed and marketed to employees who are not eligible for a major medical plan or who cannot afford one. If, as an employer, you've been put off by the stiff entry price for group medical plans, evaluating and choosing the correct mini-med plan for your employees might help in attracting and retaining employees who otherwise may not consider working for you.

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