PPACA puts niche health insurance market in jeopardy

Insuring Resources Commentary:

Because the PPACA mandates an "essential (or minimum) benefits package starting this fall many individuals on limited cover plans may see their benefits at risk.

As noted below, a cadre of employers and trade associations, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.


This is another indication that not every item in this reform package was well thought out and also illustrates how politics intervened. Because the administration wanted the consumer friendly pieces right away there is some disconnect on how provisions, like this, add up.

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Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.

Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.

This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.

Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.

A cadre of employers and trade associations, including 7-Eleven, Lowe’s, the National Restaurant Association, the National Retail Federation and the U.S. Chamber of Commerce, have asked the administration to allow the plans — at least through 2014, when the insurance exchanges are set up and tax credits become available for low-wage workers.

The struggle over the provision highlights the importance of the new law’s implementation timetable and the way its parts interlock with one another. The legislation was front-loaded with consumer-friendly reforms, such as the ban on most annual limits, in hopes the law would become more popular. Polls show the legislation is supported by about half the public.

But many of the more comprehensive features of the overhaul, such as the insurance exchanges and tax credits that would help cover those who use limited-benefit plans, don’t come into play until 2014.

That means, for nearly three years, the effect of the ban on annual limits could be costly for the low-wage, seasonal or temporary workers who most often use limited-benefit plans. The full effect won’t be known until the administration releases regulations that detail how the provision will be implemented.

The ban on annual caps is designed to improve the quality of all health coverage. It will prevent patients from “maxing out” of their health coverage if they are diagnosed with catastrophic illnesses or sustain costly injuries.