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Limited medical plans: A low-cost alternative for employers

Jan./Feb. 2007 California Country magazine

Nationwide Health Care offers a limited medical plan designed primarily for small and medium sized businesses.



The ever-rising costs of group health insurance plans are putting employers in a quandary. The average premium for an employee family of four is approaching $13,000 a year! As a result, many employers are unable to afford the comprehensive major medical plans they would like to provide to their employees, or they're being forced to consider terminating their employees' plan. 57.3 percent of all uninsured working adults are employed full time.

A limited medical plan is designed primarily for the small and medium-sized group market. There is no medical underwriting this type of plan. Therefore it is easily accessible and premiums are reduced by limiting catastrophic coverage and focusing on first dollar benefits many employees expect, like a doctor's office visit co-pay, emergency room coverage and a prescription drug card. All commonly covered charges fall into one of three categories: physician services, non-surgical outpatient services and hospital or facility services. The benefits in a limited medical group health plan apply to all of the same kinds of benefits as a comprehensive major medical plan. The only difference is the limited medical plan has limits and calendar year caps on the various coverage categories.

For example, the maximum benefits payable in any consecutive 12 months in a typical limited medical plan can run from $50,000 to $100,000, depending on the plan option selected. That's not nearly the maximum amount of coverage available under most comprehensive major medical group health plans. Yet limited medical plans offer lower deductibles (e.g., $250 or $500) and benefit schedules that are typically from $1,000 to $3,000 of coverage. The lifetime maximum payout under a limited medical plan is commonly $500,000. That's much less than the $5 million to $6 million you see with most major medical group plans. Since the employer is required only to participate in a minimum of 25 percent of the premium cost, there is always the option of sharing some of the limited medical plan costs with covered employees.

The trade-off is that the premium savings can be as much as 40 percent to 60 percent of a major medical plan. Depending on the size of the employee group, that can translate into thousands of dollars saved annually. It is important to keep in mind that a limited medical form of coverage is just what the title implies—it's limited. Still it is a very good way for an employer to start a health benefit plan or to keep one in the face of constantly rising insurance costs. It can provide a valuable tool for attracting and retaining quality employees and, unlike wages, health benefits are not subject to income or payroll taxes.

A limited medical group plan is available to groups of two or more employees. It's an affordable way to provide some benefits for groups who can't afford the traditional major medical health coverage.

Art Allen is a Sales and Support Services Manager for Nationwide Health Plans. He can be reached at 916-924-4387 or allena3@nationwide.com.


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