Which is Better: Mini Med Plans or ObamaCare?
McDonald’s. Home Depot. Disney. CVS Caremark. Staples. Blockbuster. These are just a few of the employers who have been offering mini med plans to their employees. A typical plan limits the health insurance benefit to $2,000. But McDonald’s, for example, gives employees the option to pay a higher premium and get $3,000 or $4,000 of coverage. Some plans have much higher benefits; for example, TennCare used mini med plans with a $25,000 annual cap on benefits.
Mini med plans typically have no deductible. They usually charge a modest copayment for physician visits and drugs. But if a McDonald’s employee goes into a hospital, the co-insurance rate is 30% and the plan’s benefit cap will probably be blown right through after the first 30 minutes of admission.
These plans are being abolished under ObamaCare and if the employees end up in one of the new health insurance exchanges they will get subsidized insurance that will look very different. For one thing, the premium the employee pays will double and for many it will more than double. Then they will face, say, a $1,500 deductible for individual coverage. Surprisingly, if the employee goes into a hospital he faces a 20% copayment (comparable to the mini med plans!), but the total out of pocket exposure is limited to $2,250.
Now, which of these plans is better? For the orthodox health policy community, this isn’t even a serious question. That’s because they live in neighborhoods and associate with people who would never even consider buying mini med coverage. And, remember, imposing one’s worldview on others is 90% of what liberalism is all about.
But would you be surprised to learn that there are many people who would find the mini med plan more attractive?
Explanation below the fold.
It’s itsy bitsy, teeny weeny
[Before continuing, let me say up front that the way mini med plans are structured is terribly wasteful. If we want them to work, we need to amend the HSA law and let employers and employees deposit $2,000 or $3,000 or even $5,000 in a Health Savings Account. Then, give the employee complete freedom of choice about how to spend the money.]
Let’s begin by asking why anyone wants insurance. In every other field, the answer is obvious. Insurance protects assets. Life insurance protects the value of human capital. Fire and casualty insurance protects homes, cars and other structures. People are willing to pay a premium to transfer the risk of a financial catastrophe to others. The same should be true in health care as well. Health insurance is a way of protecting one’s financial resources against the expense of a catastrophic illness.
But if you don’t own a house, you have no need for homeowners insurance. If you don’t own a car, you have no need for auto casualty insurance. Similarly, if you have no assets at all (other than your human capital) why would you want health insurance?
For low and moderate income households, the reason why mini med plans are attractive seems to be this: People living paycheck to paycheck have trouble maintaining a reserve for unexpected medical expenses. So as an alternative to personal savings and higher wages, they appear to be willing to take less in take home pay in return for a modest amount of health insurance.
Okay, all that is rational. But what would be irrational is to buy a health insurance plan with an unlimited benefit ― one that, say, is able to pay a $1 million medical bill. Why would you buy a million dollars’ worth of coverage, if you don’t have a million dollars of assets to protect?
In the modern era, a perverse idea seems to have dominated the health policy community. The idea is that the purpose of health insurance is not to protect assets. It is to provide access to health care.
That might make some sense if it were really true. But the fact is that we have made it extremely easy in this country to obtain health insurance after you get sick. More than 90% of all the people with health insurance are in a plan that cannot deny them admission because of a health condition. For the elderly and the poor, it’s 100%. In saying what I am about to say, let me preface by saying that I am aware that there are many very, very bad studies claiming that health insurance saves lives, improves health, etc. But when serious scholars have looked at this question, the reasons to think that health insurance affects mortality or health status are few. If health insurance affects health at all, the effect is marginal.
So, back to the original question. If you are making say, $15, $20 or $25 an hour, the ObamaCare plan is unlikely to look very attractive. Yes, it provides catastrophic insurance, which the mini med plan does not. But if you have a catastrophic medical event without ObamaCare insurance, odds are that you will be able to rely on the social safety net ― uncompensated care or even Medicaid. And if that doesn’t work, odds are that you or a member of your family will be able to sign up for an employer plan that pays full expenses.
People with modest incomes are going to need help from others if they have a catastrophic medical event. What’s the best way of getting help? Is it by obtaining subsidized health insurance with high deductibles and high out-of-pocket payments? Or is it through obtaining help to pay medical bills after the event occurs?
Ironically, the very people that ObamaCare is designed to help may be the ones most hurt by its enactment.
But I am open to the possibility that I am wrong. So let’s entertain a market test. Instead of abolishing mini med plans, let people choose between those plans and ObamaCare’s mandated benefits. Let’s give people what they want.
It’s too itsy bitsy for me.
“But I am open to the possibility that I am wrong. So let’s entertain a market test. Instead of abolishing mini med plans, let people choose between those plans and ObamaCare’s mandated benefits.”
Who could possibly be opposed to this?
“Let the best option win” doesn’t work in the mind of the left. They think that people will make the wrong decision, so they need a forceful hand to make them do what is best.
“And, remember, imposing one’s worldview on others is 90% of what liberalism is all about.”
I guess that goes in hand with this.
The trouble is that mini-med plans are not insurance. They are pre-payment plans for a limited amount of medical care. Some people simply want others to pay for their care, and the mini-med plans make healthy people feel good. They are not a good deal which is why insurance companies like to sell them. It is probably less expensive for healthy people to pay cash at the time of service.
True insurance covers the catastrophic, and people need to be able to buy insurance that has the deductible which make the premiums affordable. But until we have a country where Economics 101 is a mandated high school course, few will understand or embrace this.
It would have to be a really, really good Econ 101 course. Sadly those are few and far between…
You hit the nail on the head, John. There is a difference between affordable and accessible health care and health insurance.
And… I don’t believe the ACA has done anything to make health care more affordable, MAYBE health insurance for the extremely indigent
John proposes a test, and there is one right now that is available, no need to get Congress to permit it. For relatively modest amounts (typically anywhere from $50 to $100 a month, less for children) a person can sign up with a direct primary care practice and get unlimited or nearly unlimited access to a primary care doctor. A family of four enrolling in one of the more modestly priced practices could get better access to care and probably save money in the process. Here’s a writeup I did on these practices: http://theselfpaypatient.com/2013/08/08/direct-primary-care-an-option-for-self-pay-patients/
John – your option for the HSA actually already exists – a self-insured employer could establish a “minimum essential coverage” plan with a bare-bones structure (it would cover preventive care without cost sharing but with a reasonable limit on the allowed charge level, and would cover, say, only doctor office visits and basic labs and xrays, but that stuff would be subject to a $6,350 deductible). This qualifies it as a HDHP for IRS HSA purposes, at least I think it does. Then, the employer could put funds into an HSA for that employee up to the current legal limits. It still leaves the employer subject to the $3,000 penalty for any employee who refuses to take this coverage and goes and gets a subsidy at the exchange, but that employee would probably have cost the employer that amount in “claims” anyway. If you are going to be exposed to the $3,000 (admittedly, non-deductible), why not give it to your employees in this way instead? The “plan” itself would cost a minimal amount for what would essentially be Preventive Care only. If anyone can point out why such a plan would fail the HDHP definition, please let me know in response!
You are partially right. This coverage option is available using HRAs. That is, full preventive care at 100% plus an HRA (HRAs have to be spent on health care or health insurance) for what ever the employer want to pit up as an HRA. This is done as a self-insured arrangement. That is important because self-insured plans are not subject to the Essential Health Benefits requirement . They are only subject to essential coverage mandate. Do not co fuse essential benedits from essential coverage and the minimum value mandate. The employer would be exposed to a $3000 penalty for anyone going to and getting a government exchange subsidy, but many eligible would not or could not afford that cost. The employer would not be subject to the $2000 penalty for all employees (less 30 employees). This is the best legal way to offer a limited benefit plan and minimize ACA penalties for the employer and the employee.
YES YES YES MR. GOODMAN IT 100% CORRECT HERE! “In the modern era, a perverse idea seems to have dominated the health policy community. The idea is that the purpose of health insurance is not to protect assets. It is to provide access to health care.”
TOO BAD WE HAVE A FACULTY LOUNGE FOOL FOR A PRESIDENT.
This brings up the point that it is a real fallacy to call Medicaid “insurance.” Medicaid is not “insurance,” but rather a way to make the poor feel dependent on big government– and keep Democrats in power. It is a scam on the taxpayers who are forced to foot the bill. If the poor have no assets to protect, why do they need tax-payer funded “insurance?”
I have repeatedly stated that the poor do not need “insurance.” They need medical care when they need medical care and a system of many non-government free clinics is the most efficient way to provide that care.
Our plan S-2231 is soon to be debated in the NJ Senate and is simply a way to bring us back to the days before the giant Medicaid system was begun in 1965. This monstrosity has grown to the point where it now consumes 1/3 of the average state budget– $13 billion in NJ where our whole state budget is $33 billion.
NJ S-2231 would simply have the state protect the private practices of the good doctors of all specialties who are willing to donate 4 hours a week in or through non-government free clinics. The clinics would NOT be started by the government and would cost the taxpayers NOTHING. Jon Bon Jovi put up a free clinic building in Red Bank, NJ, and I am sure there are plenty of other celebrities who would be interested in doing a very good thing given the vision and opportunity.
Physicians who would no longer have to purchase medical malpractice coverage would be motivated to get their churches and other civic groups to bring the community back to caring for the poor– the way it used to be and the way it should be. Poverty should not come with “benefits,” but should be a temporary state where neighbors chip in to identify the causes and work to help each individual pull out of it.
And physicians who give of their time and considerable expertise to make this happen should be honored and protected. They should no longer be blamed for every bad outcome, yet the state would provide remedy if an injury occurred due to inevitable mistakes or true malpractice. This is already the case with the medical school attendings, residents and medical students. So why not simply expand this program to cover doctors who are willing to solve the problem of access to care for those who cannot pay?
As long as we are talking about “insurance,” let’s get serious about it.
Excellent idea. I think many physicians would be happy to donate time for the indigent instead of spending extensive time on paperwork and getting paid minimally anyway. Especially if the malpractice fears can be eliminated.
Minimum Essential Coverage is the answer. We just set up a plan which costs under $100 per employee per month, and allows employees to set up an HSA. It fully complies with obamacare mandate and gets the employer out of the $2,000 fine. Alieta is right, that a mini-med is not insurance, but a MEC is truly bonafide self insurance as per ERISA
Ralph Weber, can you say more about your plan? Sounds interesting. H. Cain
Harry,
Using provisions under ERISA allows employers to offer MEC plans, and bypass EHBs. The standard is much easier to meet, and less costly. You know that this administration favors “too-big-to-fail” businesses, so I looked at ERISA and DOL for solutions, and that’s where I found them
John, You forgot one of the basic truths about ‘Progressives’ – they think people are too stupid to think and make the right decisions for themselves.
Progressives feel they must control other peoples lives instead of educating them to make good decisions in a free market system.
Firstly it would be nice to see an argument made on merits that doesn’t include the labels “liberal” or “consevative”. As soon as i see either of those terms i immediately read “ideological agenda”. Secondly this plan leaves the problem of uncompensated acute care untouched. Not much of a “solution” when you think the largest unfounded mandate in the history of this nation is somehow OK.
…and unfunded….man I hate spellcheck sometimes.
Andrew, it’s a happy coincidence that “unfounded” works just as well as “unfunded.”
I met with Dr. Guy Clifton a few weeks ago, and he is actively pursuing the mini-med self-funded route, hoping that employees will choose the employer’s plan, rather than going to the Exchanges.
I would reverse the mini-med plan that pays up to $25,000 in benefits per year.
Large employers can self-fund up to $25,000 per person per year.
With no dedictible, employees and dependents could spend up to $6,000 per year, for necessary, effective medical expenses.
Through our unique paid-up benefits rider, the employer’s exposure reduces every month. After 36 months, the employee and dependents who have spent under $6,000 per year, as a family, have $25,000 of paid-up benefits, reducing the employer’s exposutre and premiums by up to 60%.
This plan will vbe available for select self-insured employers before year end, and be available for fully insured plans in Texas in 2014.
Don Levit
Along with its ability to preserve one’s assets, I look at health insurance as a way to insure one’s future well being that is not associated with mortality, things that make life better. As an example total hip replacement surgery can correct chronic hip ailments that are painful and limit ambulation. The results with treatment of this non fatal medical problem along with many others leads to a dramatic improvement in quality of life. Berwick an ObamaCare favorite loves the British system, but one has to wonder how many Brits are home bound because their hip surgery (and many other modalities of care) is not considered an emergency and thus has waiting times that can be longer than the individual’s lifespan. That is something we will be facing in the future if Obama gets his way.
I recently had an experience abroad where a ‘good’ hospital functioned under a system of funding where the payment to the hospital was determined annually (Croatia) by the government. I am sure they had what Berwick would consider to be adequate care. Yes, it was adequate and very spartan, but in my opinion the care would lead to an outcome that might not increase mortality, but could decrease the quality of life in the future while adding to the complication rate.
I am glad to give up that 55 inch TV, leather seats for the car, and all the Starbucks Lattee’s for the care received in the US. In the short time in that hospital my wife developed a small decubitus ulcer because staffing was short so diapers were used instead of bed pans. I could see what the treatment was like in a hospital where it appeared the staff was caring and trained. It was easy to see in a ward of 6 and no curtains. Likely, less expensive technology was used which can leave a person ambulatory, but perhaps in a bit of pain with reduced ambulation. Immediate physical therapy post op seemed to be quite sparse. Thus the outcomes were likely good when one thinks only of mortality and that the procedure was done, but the quality? I don’t think so.
Thank goodness for the private markets that provide private jets, doctors and pilots.
It also would seem that those living paycheck to paycheck would be attracted to the small out of pocket expenses mini-med plans offer for routine medical needs. The baby has a cough, and it costs only $10 for an office visit and $5 more for the medicine. If those buying a mini-med are mostly young, mostly healthy people, they will rarely experience an expensive health problem. And, they won’t be able to afford the $2,500 deductibles before the ACA plan kicks in for sure.
A long time ago my family was covered by the equivalent of a mini med in pretty much the situation that Breck outlines above. Young, healthy, no assets, low income, mostly paycheck to paycheck. When someone needed fairly minor hospitalization, the mini med came in handy. Reserves were out of the question. It took us four months to pay off the copay, but the hospital was happy to stretch the payment out and everything turned out ok.
A full blown health insurance policy would have made no sense. We couldn’t have afforded it, and we didn’t have assets to protect. A $2,500 deductible would have been unthinkable. Throw in the premiums and we would have been far better off with no insurance than with a conventional policy that protected us against a low risk event at high cost. The mini med took care of the broken bone and the stitches. We were more likely to face costs for those than for cancer treatment.
This administration has created NEW problems with health care. Looking to BUCAH to solve the problem they created and lobbied for is like hugging a Cactus.
New problems need new solutions.
This is a very good article. I would combine mini-med plans PLUS Medicare Part A as a payor of last resort for hospital care.
This would require a small increase in the Medicare payroll tax. (i.e. one or two per cent). This is miles cheaper than the taxes which will eventually be required to fund the ACA.
The ACA is trying give everyone comprehensive private health insurance. I would consider giving up the ghost on that one. Let taxes pay for hospitals, and let employers and individuals figure out creative ways to pay for other things.
I have been ‘pushing’ this combination of sociallism and libertarianism for some time.
Bob Hertz, The Health Care Crusade
On the side — Dr Eck may be mistaken to imply that Medicaid has huge costs because of office visits by young poor people. Over two thirds of Medicaid’s costs are driven by the poor elderly and the disabled.
Bob– you are partly right. It is one-half of the Medicaid program that goes to care for the elderly.
Our plan would not solve the entire problem, but it would take a big chunk out of the Medicaid program.
–One half of the babies born in NJ are to Medicaid mothers. That could be handled by pre-natal centers and volunteering physicians. The woman would get personalized care as they meet grandmas who would give time to nurture these young women. They need families that care about them and could teach them how to make better life choices.
–Medicaid patients are twice as likely to visit the ER for non-urgent care than those with no insurance. These could be triaged to non-government free clinics that could even be in a few rooms in the same hospital. The taxpayers should not be billed for them.
–There is a tremendous shortage of psychiatrists to care for some very scary mentally ill patients. I know because the hospitals send them to our free clinic. I am not a psychiatrist but have been able to write prescriptions to keep the patients stable until they can get an appointment 6 weeks hence. S-2231 might be a better solution than gun control in preventing tragedies.
I understand that we might not eliminate the entire Medicaid budget, but cutting $3 billion of the $13 billion would balance our budget. Other states would find the same savings.
I find it hard to understand why few people are seeking ways to solve the entitlement problems that are bankrupting us. S-2231 would go a long way toward lowering Medicaid costs.
Dr. Eck, your ideas for providing care outside the Medicaid framework seem very logical and practical to me.
Medicaid – the very federal/state program specifically designed to finance medical care for America’s poor – has failed spectacularly to fulfill its mission. Yet a key part of ACA does not seek or promote creative means of ensuring the needed care but instead significantly expands Medicaid. Talk about painful irony.
Sometimes when things spin out of control, the correct advice is to “steer in the direction of the skid.” For Medicaid, I think that can’t be the correct advice.
As to understanding why few high-level (i.e., political) people seem to be seeking solutions to the entitlement problems . . . perhaps these politicians are not primarily interested in solving those problems. What if, instead, all the talk from high levels about solving the entitlement problem is meant to disguise the work on what politicians view as the real problem – not enough power in their hands or enough money running thru their offices? That’s my theory anyway.
Direct primary care / concierge is actually cheaper than Obamacare. I am logged into the TN exchange now and just did a comparison. I unfortunately know too much about ObamaCare as I used to be health policy intern for the physicians on the U.S. Senate HELP Committee and I witnessed the drafting of it.
I agree with you 100% Sean Parnell.
The posts by H Carroll and Ron Bachman seem sincere and constructive — but my gosh there are a lot of federal alphabet soup and buzzwords. I know something about health policy but I was stumped….one can imagine how stumped a busy business owner will be.
Democrats in general love employer mandates, because they get people covered but the costs show up off the federal budget. If Republicans want to be different but constructive, they should step forward and be willing to put some costs on the federal budget after all. Let Medicare expand for catastrophic care, and let employers help out with mini med plans that (as Linda Gorman points out) are more relevant to their employees anyways.
I’d send this to Mr. Goodman but don’t know how to contact him:
“The Government Accountability Office (GAO) reported in April 2008 that many individuals enrolled in HSA-qualified health plans did not open tax-qualified HSA accounts” (Ask.com)
Is this correct?
?