The upcoming changes in health care reform are going to make an impact on limited-benefit health insurance plans. The changes could cause many of these kinds of health insurance plans to stop existing. An argument going around in the news, and on the internet, states that it is better to have one of these limited-benefit health insurance plans than to have absolutely no form of health insurance at all. But, is that true?
Limited-benefit health insurance plans, which are also sometimes referred to as mini-med plans, are health insurance policies that come with an annual limit, and many come with a lifetime limit as well. The annual limit is a specific dollar amount. The insurance company will cover the cost of a person’s medical bills up to that dollar amount, and will not cover anything at all after that amount has been hit, for that particular year.
Some plans also include a lifetime limit. This means that the insurance company has set a specific dollar amount that it will spend to cover the costs of a person’s medical bills over that person’s lifetime. Once the person hits that limit, the insurance company will stop paying to cover his or her medical bills, forever. After the cap, or limit, has been hit, the insured person is stuck paying for the rest of his or her medical bills entirely out of pocket.
Right now, big companies, like McDonald’s, for example, offer a limited-benefit insurance plan to their hourly employees. There is a deductible that must be paid for, out of pocket, before this insurance plan will start covering medical bills. The McDonald’s insurance has a maximum benefit of $2,000. This amount of money might be just enough to cover one trip to the Emergency Room, or one overnight stay in a hospital. However, if the person has a serious illness, or needs more medical care after the maximum benefit has been hit, he has to pay for all of those bills on his own. At this point, it’s as though the person doesn’t have any health insurance at all.
This is the reason why limited-benefit health insurance is bad. It gives the insured person a false sense of security, and a false sense of hope. The person is paying for the insurance with the expectation that the insurance will help cover the cost of the person’s medical care. After all, the reason most people decide to get health insurance in the first place is “just in case” they get seriously injured, or severely ill. These limited plans often make it difficult for the person to understand exactly how little the insurance company is going to help them. They may not hide it, but, in the past, they were not required to point it out. In many ways, it would be better to have no health insurance, and understand that all of your medical care costs will come out of your own pocket, than to spend money on an insurance policy that isn’t going to help you when you need it the most.
Image by Mike Schmid on Flickr