Although both fixed indemnity and expense incurred limited medical plans continue to be impacted by the Patient Protection and Affordable Care Act, fixed indemnity plans are weathering the storm relatively intact, while the expense incurred structure has taken a beating, experts say. Fixed indemnity plans do not have to comply with PPACA regulations because they do not mimic major medical insurance policies as expense incurred plans do.
The Center for Consumer Information and Insurance Oversight, the agency within the Department of Health and Human Services that handles the annual benefit limit waiver applications, has administered more than 1,400 waivers to expense incurred plan carriers. New business sales on expense incurred plans have been shut down since September 2010.
Jon Duczak, vice president at limited medical provider The American Worker Plans, says for those brokers with clients still looking for limited medical options, the indemnity market offers several advantages that can be used in many ways within clients' overall benefit strategy. "If you are still maintaining expense incurred business and have a waiver, although you can maintain that coverage until 2014, agents should find a long-term benefit strategy by analyzing the indemnity market because it has a more stable condition," he says.
American Worker Plans provides limited medical coverage to large national companies as well as chain gas stations and convenience stores. Since 85% of the company's coverage sold is limited medial, Duczak intends to continue selling fixed indemnity plans into 2014 and beyond. "For our type of plan structure its kind of business as usual," he says.
Carlo Mulvenna, vice president, group domestic markets with Pan-American Life, feels that fixed indemnity plans are ideal for candidates that want to be able to go to the doctor or have a physical while also being able to get their prescriptions filled. "All of these can be taken care of with a limited medical plan," he says.
Mulvenna says that many agents' major medical clients are interested in moving toward these plans because they have received consecutive years of higher renewal increases and they cannot afford their major medical.
"If you look at an indemnity plan, it's probably from a consumer's prospective one of the easiest things to understand because every benefit is in a schedule. There's no fine print or surprises," Mulvenna says.
For the employee it's a very simple decision process, says Duczak. "Whether limited or not, these are still employee benefits. They still have some of the same features that are associated with a benefits package," he says. "You still have the ability to recruit employees, there is retention and there is the financial aspect."
He adds that generally larger corporations are selling this coverage on a voluntary basis and typically using their pre-tax or Section 125 program. Therefore, he says, any premium going through a voluntary basis is producing FICA/FUTA/SUTA savings for the employer because they are avoiding tax obligation with portions of salary.
Questions to ask
There are many intricacies involved with limited medical programs and how they're operating, mainly with the expense incurred plans. Brian Robertson, executive vice president at Fringe Benefit Group, says there are a few important questions that brokers need to be aware of:
* How does PPACA impact the style of limited medical plans that clients are enrolled in?
* With expense incurred renewal is there going to be a fee?
* What kinds of future PPACA clarifications are going to impact my plan?
* Will the plans guarantee that coverage will remain in force for the entire time that I have my group in that program?
* Will I receive the waiver again?
* Will the MLR remain the same?
Brokers are faced with a unique challenge, says Robertson. "There's so much information out there and so much impact on their blocks of business, I think they are trying to focus on where they are impacted the most," he adds. "The navigators will only be there to help once the exchanges are formed and so many states are anti-exchange that I'm not sure where they or the agents will fit because it hasn't been clarified."
In the near term, Robertson believes agents can certainly add limited medical plans to their portfolio, especially if they have smaller to mid-size employers that are looking for a way to introduce a health benefit to their employees or they have a class of employees that might not be covered under major medical programs.
"There is no government [entity] that will be able to fulfill everyone's need. There's always going to be a place for companies to offer alternatives and products to fill gaps that are created by any plan that's out there," says Mulvenna.
The majority of confusion was created over the waiver process, Duczak thinks. He believes it was originally intended to be an annual filing, but after HHS provided FAQs on the waivers it helped to clear up some of the confusion. Doing away with granting any additional new waivers but allowing all of the waivers granted previously to be renewed through 2013 puts a political spin on health care waivers, he adds.
Pan-American's Mulvenna believes any misinformation falls on the industry as a whole: "We have done a poor job of defining the differences between the indemnity based and the reimbursement model that it's two distinctly different models. ... You have to feel for these people because they are left with, 'OK, here's a plan, good luck, figure it out.' In the health care bill there was a lot of general guidance but there were no specifics and it was left to HHS to formulate the policy, define limits, define amounts."
Mulvenna thinks that things will become clearer next summer when the Supreme Court rules on the mandatory purchase aspect. "We believe there will be a place for limited medical because it's affordable for employers," he says.
Adds Duczak: "Limited medical in terms of an indemnity model is here to stay. ... Whether or not health care reform was here, [limited medical plans] still offer a great deal of stability and certainty."
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