Why Are New Limited Benefit Plans Coming to Market?

somarco

GA Medicare Expert
5000 Post Club
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Atlanta
I can't figure it out. Are carriers stupid or do they see a "loophole" in Obamacare.

Here is a clip from an email I got today from an IMO.

This Guaranteed Issue Limited Medical Plan features:
• 6-Month Advanced Commissions to qualifying agents
• NO enrollment fee, No Association fee's
• Commissions Paid Daily via Direct Deposit
• Truly Guaranteed Issue Medical Plans
• Guaranteed RENEWABLE Policy
- Not a certificate from a group master policy

Platinum Plan Features:
-6 day hospital stay - plan pays $14,000
-Intensive Care Benefit $2,000 per day IN ADDITION to the above Hospital Confinement Benefit
-Up to $10,000 PER surgery benefit
-Specified Injury schedule up to a maximum of $1,800.00 per injury
-4 Doctor Visits at $100.00 each visit
- Maternity Coverage (10 month wait)

EXAMPLES with Beech Street repricing:

PET Scan, Original Cost: $4,000 Beech Street reprice: $2,000!
Cat Scan / MRI, Original Cost: $1,400 Beech Street reprice:$550!

Deep negotiated discounts also apply to Physicians Office Visits, ER, Hospital Confinements, and much more!

All the Above and more For LESS than $218.00/month
 
Somarco,
You don't need an Obamacare Loophole to sell these, because they're not Major Medical Provider Re-imburse policies. Just "Medical" plans. It's what the flyers DON'T say that can get your arse cooked.
1. Does not exempt the purchaser from the Obamacare IRS penalty-tax.
2. One or Two year pre-existing condition waiting period.
3. Major anguish and a potential lawsuit, when the insured has a 90 thousand dollar bill from 6 days in the hospital, $3,000 CAT Scan(not covered), etc. etc..

You know all this but you're just testing us, aren't you Somarco?
-ac
 
I understand they are not MM and will generate those $95 penalties.

Some circles say mini-meds will be forbidden in 2014 and later. Others are going full steam ahead.

I don't know if Assurant will still market their high ($25k) deductible plan after next year or not. Nor do I know if other carriers will do likewise.

But for those who don't mind the penalty but don't have a buttload of cash hanging around, a mini-med with a hi deductible MM stacked on top might be a workable concept.
 
Another strategy is to buy a ST MM for the year, and get on a QHP plan at the first of the year if your health costs warrant it.
 
As I have said before, people will want to have something vs. nothing. $218 per month might not be too hard to swallow when they see other premiums.

People are gonna see/meet/hear of a guy who doesn't have a pot to piss in who has healthcare meanwhile they have nothing.

Have you ever been somewhere with a group of people or even one on one with somebody and the topic of health insurance comes up and they start talking about how their plan sucks or even how great it is and then ask who you have? Then you are embarrassed because you don't have health insurance. It's not a good feeling.

A certain amount of people will want something vs. nothing. Some of these types of people will even convince themselves that what they have is great and they pay a lot less than you or anybody else. Ever run across those types of people before? These plans are right up their alley.
 
Are carriers stupid or do they see a "loophole" in Obamacare.

It's a loophole in the PPACA law that allows fixed indemnity style of payment to be exempt from PPACA. Somarco, I know that you know the history of fixed indemnity, but for those who haven't been in the business as long as you have...

For the last 20 years, fixed indemnity plans were marketed to people who needed guaranteed issue. So, the plans were very limited in benefits, even though they still cost almost as much as a true major medical. Since unhealthy people couldn't get true major medical (unless they had group insurance options, COBRA, HIPAA, or a high risk pool), then all that was left was limited benefit. It was a terrible purchase, and most agents (including me) have never sold one and never will.

However... the need for GI is gone. Everyone can get insurance in 2014. In one fell swoop, the limited benefit fixed indemnity market has evaporated. Thank God!.

Now, we've turned from medical underwriting to financial underwriting. Fixed indemnity could rise again to fill this niche. Since the unhealthy person who needs GI can just go get Obamacare Platinum plan, then the people who need fixed indemnity plans are the healthy, higher income people who won't get a subsidy yet can't afford high priced QHB plans. Yes, they MIGHT have to pay a penalty, but not if the lowest priced bronze plan costs more than 8% of their AGI. For a person making $200,000 AGI, that 8% is $16,000. There are a lot of folks over 400% of FPL that are exempt from the penalty for not buying QHB. But they want some sort of insurance, and they want quality instead of limited benefit.

That's why fixed indemnity plans may rise from the dead, and turn from being trashy limited benefit policies for the unhealthy who needed GI, and turn toward the higher income people who want an alternative to QHBs.

The reason fixed indemnity can do that is because a true fixed indemnity plan is EXEMPT from PPACA requirements, including the requirements to have essential health benefits, be GI, have no pre-ex clause, have no annual max, etc.

So... we have really bad limited benefit fixed indemnity plans already, and now we are seeing slightly better ones, and I'm sure that soon we will be flooded with mediocre ones, until some carrier decides to bring out a real quality one. Then the sales begin. In the UH1 webinar that we have discussed on another thread, the UH1 rep said this is in their game plan. They said they have these plan designs waiting, while they are working with HHS to make sure they qualify as being exempt from Obamacare, and then they are ready to roll. An Exec from one of the big "colored companies" said he expects to see a lot of these on the market. The Society of Actuaries put out a report saying they expect to see a lot of them. The govt officials have been circulating documents (fueled by complaints from pro-Obamacare forces), worried about what they could do to keep these plans from diverting the healthy & higher income folks from Obamacare. It's coming. We just need to make sure we push carriers to create QUALITY plans that are comprehensive in the scope of medical services that they cover, and that are adequate in the level of benefits that are paid for each service.

Carriers can do this. They have PPO contracts that list every possible service and the "allowable" fee. They can design plans that use the "fixed indemnity" style of reimbursement rather than "reimbursement for charges" style. They can make it "per day" or "per time period" rather than per item or procedure, like the law requires. There are some difficulties, but it is doable. There is definitely a market for it. I wouldn't be surprised at a slew of mediocre ones hitting the market. But they will be dead on arrival if a quality carrier creates quality plan design(s) and markets them correctly. This is on my "please, God, please" list.
 
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Bob. I am not an expert on these type plans, but I was confused by the outline of benefits because some of the items had a service based benefit. I thought the plans that were exempted by ppaca were indenmnity plans that paid on fixed amt basis. But I could be wrong.

Ann H is correct. A few months ago the feds acknowledged that an employer can satisfy the ppaca coverage requirement by providing bare bones coverage via an indemntiy mini med. Strategy is somewhat simple, employer uses one that meets the requriements of bronze and contributes enough to get the 9.5% of workers W-2 satisfied. Remember, employer is not required to provide $ to dependents.

The kick is that while the employee has coverage the dependents don't and they can show that their costs EW unaffordable, thus avoiding the penalty.
 
Back in the "old" days, before comprehensive major med, we had basic insurance plans sold by BX, MOO, Bankers L&C and a few others. Those were followed by base + major medical.

I believe we might see a resurgence in the base + MM concept.

But I could be wrong . . .

Bill, if STM have to be GI and cover pre-ex I don't see that as viable as the base + MM that does not have a time limit.
 
So... we have really bad limited benefit fixed indemnity plans already, and now we are seeing slightly better ones, and I'm sure that soon we will be flooded with mediocre ones, until some carrier decides to bring out a real quality one. Then the sales begin. In the UH1 webinar that we have discussed on another thread, the UH1 rep said this is in their game plan. They said they have these plan designs waiting, while they are working with HHS to make sure they qualify as being exempt from Obamacare, and then they are ready to roll. An Exec from one of the big "colored companies" said he expects to see a lot of these on the market. The Society of Actuaries put out a report saying they expect to see a lot of them. The govt officials have been circulating documents (fueled by complaints from pro-Obamacare forces), worried about what they could do to keep these plans from diverting the healthy & higher income folks from Obamacare. It's coming. We just need to make sure we push carriers to create QUALITY plans that are comprehensive in the scope of medical services that they cover, and that are adequate in the level of benefits that are paid for each service.

Carriers can do this. They have PPO contracts that list every possible service and the "allowable" fee. They can design plans that use the "fixed indemnity" style of reimbursement rather than "reimbursement for charges" style. They can make it "per day" or "per time period" rather than per item or procedure, like the law requires. There are some difficulties, but it is doable. There is definitely a market for it. I wouldn't be surprised at a slew of mediocre ones hitting the market. But they will be dead on arrival if a quality carrier creates quality plan design(s) and markets them correctly. This is on my "please, God, please" list.
I just spoke with my UH1 rep a few minutes ago and he agreed that next year we will see essentially three markets for the individual: exchange, outside exchange and indemnity. Healthy, over 400% 20 somethings I think will fill this last market. The penalty will be low enough that between the premium and penalty, they will save money over a GI premium inside or outside the exchange.

The rep went as far as to say they are currently working on the plans, so I think UH1 is going to be a player. I hope so, anyway as currently they beat out the other carriers I contract with when comparing apples to apples. They also are big enough to control the market; if they offer something that is of value, anyone else that wants to be in the game will have to follow suit.
 
You are right, Somarco, about "back in the old days". I have been in this business 33 years, and I know that Somarco has a few more years of experience than I do. For those who do not have that age (oops, I mean experience), this market has seen paradigm shifts that amazed us. In the 80's HMO's came out with "provider networks" and "copays" (an idea we had never heard of), then PPO's one-upped them with copays + an expanded network and freedom of choice. That caused the demise of the traditional vanilla major medical, (which was a $100 or $250 deductible, 80% of the first $5,000 plan). People forgot about deductibles and focused on copays. Then HSA's caused the traditional plan designs to come back, and we had to re-explain why there were no copays. Now fixed indemnity may come back.

These fixed indemnity plans have restrictions, in order to keep them exempt from PPACA. They cannot coordinate benefits with a major medical plan (therefore eligibility rules will probably state that you cannot have FI if you have MM). They cannot have a "per item or per procedure" benefit but must have "per day" or "per time period" benefits. However, most FI plans currently do both - such as $xxx dollars per day for every day of hospitalization - and that causes it to comply with the "per time period" benefit. Fixed indemnity cannot be based on expense reimbursement like 80% of the in-network charge, (so it must be a dollar figure that calculates out to be about 80% of the in-network charge). It cannot have deductibles and co-insurance, so they will have to make the benefit equal a little bit less than the in-network fee schedule. And, carriers will have some difficulty designing an out-of-pocket maximum so that insureds don't have ongoing exposure. It may be possible that carriers stack them like we used to back in "the old days" as Somarco said.

Somarco, please explain the base + MM concept, and why it is ripe for a resurgence. I sold one from Washington National about 30 years ago, and haven't seen one since.
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I just spoke with my UH1 rep a few minutes ago and he agreed that next year we will see essentially three markets for the individual: exchange, outside exchange and indemnity. Healthy, over 400% 20 somethings I think will fill this last market. The penalty will be low enough that between the premium and penalty, they will save money over a GI premium inside or outside the exchange.

The rep went as far as to say they are currently working on the plans, so I think UH1 is going to be a player. I hope so, anyway as currently they beat out the other carriers I contract with when comparing apples to apples. They also are big enough to control the market; if they offer something that is of value, anyone else that wants to be in the game will have to follow suit.

Thanks, Tim. That is a good confirmation to hear. The report from the Society of Actuaries mentioned that big players currently have these plan designs, and they included Humana, Aetna, Cigna and many of the Blues. Some of the Blues have tried to bring out limited benefit plans before, or hospital plans, but they flopped. Now there is a reason why they could succeed, but only if the benefit levels are brought up to a level of "quality".
 
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