Limited benefits Featured

7:00pm EDT March 27, 2006
In only a few short years, limited-benefit plans have risen in perception from a status as low-selling bare-bones plans marketed by niche vendors to potentially viable solutions to today’s health care problems. Many employers find that a limited-benefit plan represents the choice between doing something and doing nothing at all.

There are more than 24 million part-time workers in the United States. Another 1.6 million workers hold two part-time jobs — essentially working full-time, but without the benefits that come with one full-time job. According to the Bureau of Labor Statistics (March 2005), only 22 percent of America’s part-time and hourly workers have any type of employer-sponsored health insurance. This compares with 73 percent of full-time American workers insured through their employers.

“This is a serious issue. Many workers either cannot afford health insurance, or they are not offered health care benefits by their employer.” says Bill Berenson, vice president of sales for Aetna’s North Central Region. “By focusing on this discrete segment of our nation’s workforce, limited-benefit plans provide alternatives designed to expand access to affordable coverage to part-time and hourly workers for many of their most frequent health care expenses.”

Smart Business spoke with Berenson to learn more about limited-benefit plans and how these plans can help employers reduce turnover, attract experienced employees and reduce rising health care costs.

What are limited benefits?
Limited-benefit plans are designed to cover first dollar expenses associated with non-work-related accident and sickness up to specified benefit levels. The term “limited” refers to the fact that there are caps put on the total amount of benefit the plan will pay for in a coverage year.

For most plans, benefits include medical, dental, vision, life, accidental death and short-term disability coverage. Also, some plan designs may limit coverage to a certain number of doctor visits, days spent in the hospital or dollar amounts.

Are limited-benefit plans all the same?
While there are many similarities, not all limited-benefit plans are the same. Many plans claim to offer discounts, but require the member to pay the full out-of-pocket cost at the time of service and submit a claim form for reimbursement. There are other plans designed like a Usual and Customary plan, where members pay only the appropriate co-pay at a time of service; the provider submits a claim and the member would be responsible for any deductible, coinsurance and allowable charges in excess of his or her annual medical expense benefit maximum. Some plans may continue to offer a member network discounts even after a member exceeds the annual benefit maximum. Employers should investigate plan designs closely.

What is the cost to the employer for the limited-benefit plans?
The financial risk to employers will depend on the insurance carrier they choose. Some carriers do not require the employer to contribute to the premium, although they give the employer the option to do so. As with any voluntary product, employer contributions yield higher participation.

How much do the plans cost the employee?
Employee premiums vary. The average cost to the employee is equal to approximately two hours of wages per week. In addition, there may be co-payments for treatments received. For example, the average co-pay for a doctor’s office visit is $15; the average in-network coinsurance percentage is approximately 70 percent. Since these are limited accident and sickness plans, there is no limit to the out-of-pocket expense for the insured.

How do limited-benefit plans reduce employee turnover?
The impact of turnover on a company’s bottom line is significant in both direct and indirect costs. Direct costs are easier to track. They include the costs associated with recruiting and training. Indirect costs — including lost productivity, lowered morale among employees and customer dissatisfaction — are not easy to quantify.

How does offering limited benefits help attract experienced employees?
The growth of service-related businesses has increased competition for qualified and experienced employees. Presenting workers, who otherwise would have no insurance at all, the opportunity to obtain health care is a strong recruiting tool. Additionally, these benefits may also be a motivation factor for employees who are contemplating a change in job; the presence of benefits may sway the employee’s decision.

How do limited-benefit plans help control escalating health care costs?
When an company offers a limited-benefit plan option, it gives employees access to the health care system and plays a role in helping reduce national medical costs. In addition, coverage for office visits also could reduce the number of individuals resorting to hospital emergency rooms for acute and routine care. Emergency room coverage is far more expensive than treatment at a doctor’s office or outpatient clinic.

WILLIAM BERENSON is vice president of sales and service for Aetna’s North Central region. Reach him at (312) 928-3323 or