The Downside Of Limited Benefit Association Health Plans

We recently worked with a client who is a Colorado REALTOR and a member of the National Association of REALTORS.  She mentioned that she was eligible for coverage through NAR, but wanted to compare her options in the individual market with the policies that she could get as a NAR member.  She sent over the details for us to look at, and we noticed that the coverage that NAR was touting as a benefit for members is basically just a guaranteed-isREALTORS Core Health Insurance downsidessue limited benefit indemnity plan.  Members have a choice of three different policy designs:  The Physician Plan ($200/month for our client’s family of four) doesn’t include any inpatient benefits at all; it covers up to $100 per visit for office visits and ER visits, and up to $1000 for accidents.  The Value Plan ($300/month for our client’s family) and Platinum Plan (almost $500/month) included limited inpatient and surgery benefits, but even the Platinum plan capped its benefits at $1000/day for inpatient care and $3000 per operating session for inpatient surgery.  The plans are all guaranteed issue, but they have a 12 month pre-existing condition exclusion for any hospital or surgical expenses.

NAR makes it clear on their website – for people who are detail oriented – that the coverage offered through the REALTORS Core Health Insurance is not major medical and that the benefits are limited.  They also provide a good informational page on their site about the struggles that self-employed people face when it comes to securing health insurance, and the efforts that NAR has made and continues to make in terms of making true group health insurance available to independent contractors who are part of a large association-type group like NAR.  Presumably all of this will be a moot point as of next January when the individual mandate and guaranteed issue individual health insurance are implemented, but for now, it does appear that NAR is cognisant of the problems faced by many self-employed people who are trying to obtain medically-underwritten individual health insurance.

My concern is that a lot of people don’t really read the fine print when it comes to their health insurance.  It’s not the most exciting reading material, and if you’re not used to reading plan description forms, it can be tough to figure out the differences from one policy to the next.  I can imagine that there must be some new REALTORS (especially those who are coming into the profession after working for an employer that provided group health insurance coverage and thus are used to having employer-sponsored health benefits) who just assume that the coverage they are offered through their NAR membership must be a good deal and provide good “group” coverage, without looking at other options.  And since the “Core Health Insurance” plan covers day-to-day expenses like doctor visits and minor ER visits, it might lull members into a false sense of security as their small claims are paid throughout the year.

The problem is that the “Core Health Insurance” provides “limited indemnity benefits which are not intended to cover all medical expenses and should not be considered as comprehensive health insurance coverage.” (that’s the wording that was included with the plan details and quote that our client forwarded to us).  And that, unfortunately, might be something that members learn about when they most need real health insurance:  when they’re in a situation that calls for comprehensive health insurance that pays for the care that is needed rather than a low daily dollar amount.

Just to be clear, limited benefit indemnity plans are not going away as a result of the ACA.  This is still something that consumers will have to be aware of even after the ACA is fully implemented.  Mini-med plans – which were banned by the ACA but still exist in many instances thanks to waivers – are different from limited benefit indemnity plans in that they just have a low total benefit cap.  Limited benefit indemnity plans might technically have no total benefit cap at all, but instead they employ set (and usually low) limits on each specific type of treatment.  The end result could very well be patients who are stuck with huge portions of their medical bills unpaid (just as they would with a mini-med), but because limited benefit indemnity plans are exempted from ACA requirements, they will continue to exist.

The NAR website clearly states that the plan isn’t comprehensive health insurance and that it’s best suited for people who can’t afford regular health insurance, can’t qualify for a regular individual plan because of pre-existing conditions (that problem should be going away as of January 2014), or people who have a very high deductible on their individual health insurance and want a supplemental plan to cover the smaller expenses.

But what sort of value is this type of plan really providing?  If you look at the least expensive plan that our client was quoted ($200/month), it was basically paying for doctor visits (up to $100/visit) and not much else.  You’d have to have a lot of doctor’s visits to make that worthwhile.  On the high end, the Platinum Plan ($500/month) would cover some hospital and surgical expenses in addition to the doctor visits, but anything more than a minor health concern could quickly exceed the daily limits.  To give an example, my mother broke her femur a couple years ago and ended up in the hospital for five days.  Her stay also involved surgery to put a rod in her leg (maximum benefit on the Platinum Plan would be $3000 for the surgery).  That comes to a total of $8,000 that the Platinum Plan would have paid for her care (there’s accident coverage of $5000 per year on that plan too… I’m not sure if that’s in addition to the hospital and surgery costs, or instead.  Even if we assume that it’s an additional benefit, the total benefit would still only have been $13,000).  But my mother’s care totaled over $50,000.  And that was just for a broken leg… imagine what it would have been if she’d broken her neck instead.  Her health insurance at the time had a $5,000 deductible.  But after she paid the $5,000, everything else was taken care of.  And that’s a far better position than she would have been in if she’d had a limited benefit plan with low out-of-pocket costs for “day to day” expenses, but low limits on coverage for significant expenses.

Our own family of four pays less then $500/month for Anthem Blue Cross Blue Shield health insurance with a $3500 deductible, in addition to an accident supplement that will reimburse up to $5000 if we have claims related to an accident or injury (with two little boys, this seemed like a good supplement to our high deductible policy).  Our policy covers all preventive care 100%, although we don’t get coverage for non-preventive “day to day” expenses until after we meet the deductible.  But in the event of a serious illness or injury, we’re covered.  There are no daily caps or “per operation” caps for surgery.  It’s true that we had to go through medical underwriting to qualify for our plan, and that doesn’t work for everyone.  But for people who can’t qualify for medically underwritten plans, CoverColorado and GettingUSCovered both provide “real” health insurance plans that are guaranteed issue.

Overall, it’s hard for me to see how the Core Health Insurance plan being marketed to members of NAR is providing a good financial value, and I think that there’s definitely a possibility that new members might overlook the details that explain that the plan is not intended to take the place of comprehensive health insurance.  In that case, they might simply assume that it’s “group coverage” and sign up thinking that it’s their best option.  It’s likely that this type of plan and marketing (designed and priced exclusively for _______ members! ) is not limited to REALTORS.  Independent contractors are a target market for discount plans and limited benefit plans, since true group coverage is generally not available to them.

If a limited benefit plan really does fit your needs, then go for it.  But if you’re an independent contractor and you’re being offered a “membership plan” or “association benefit” policy that is available on a guaranteed-issue basis, be sure to read all the fine print first and compare the coverage  with the benefits provided by a comprehensive health insurance policy.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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