Limited Benefit Health Insurance - Is It A Good Deal For Your Employees In Texas?

As a small business owner, you're always looking for ways to save money. Some employers have found that buying cheap group health insurance is one way to go. And while this has its upside, you should be careful, because it could also throw your employees into a health crisis scenario.

For many employees in Dallas, Houston or throughout Texas with no health insurance, a policy known as "Limited Benefit" sounds like an appealing choice. Premiums are as low as $10 a week. But there's a big catch: these policies pay as little as $1,000 a year or $10,000 for a lifetime - so little that some health insurance experts question whether they really amount to health insurance at all.

Even insurance industry executives and agents are highly skeptical of such plans. At one insurance-company meeting last year, a roomful of agents burst into laughter when an executive described a Limited Benefit plan. But plan defenders say the simple act of giving low-income workers an insurance card can encourage them to seek routine preventive care. They contend that some measure of health coverage, however small, is better than none.

Currently, Limited Benefit policies are among the fastest-growing health insurance offerings for temporary and hourly workers. Sold by half a dozen insurance companies, they cover an estimated 750,000 employees and family members. Wal-Mart Stores Inc., McDonald's Corp. and Lowe's Cos. are among major companies making them available to their employees. For the nearly 47 million uninsured people in the United States today, having Limited Benefit health insurance would be better than having no coverage at all.

Limited Benefit plans place severe financial caps on benefits such as inpatient care, hospital room and board and other critical services. One of the bigger selling points for Limited Benefit plans, however, is that they often cover at least part of the insured's everyday routine and preventative medical expenses. Still, even with respect to every-day care, the policies have restrictions such as waiting periods for "wellness checks" and exclusions for the treatment of pre-existing conditions. Once the insured exhausts a limited amount of routine or preventative services, limited benefit plans often have deductibles that must must pay each year before other benefits kick in.

Some insurance companies have tried offering low-cost policies that cover "catastrophic" health costs. But industry officials say low-income employees haven't shown much interest because such plans require high deductibles - perhaps a couple of thousand dollars - before coverage kicks in. Low-wage workers are more interested in something that covers basic expenses.
While many employers who sponsor Limited Benefit health plans for their employees reluctantly concede that the plans offer little to no help with a serious illness, the employers and their insurance agents say that they make sure workers understand what this particular insurance will and will not do.

Enrollment in Limited Benefit health plans has grown about 20% in each of the past few years. Employers typically make them available mostly to hourly workers, either full- or part-time, and collect the premiums through payroll deduction. Companies in the service sector find that 10% to 30% of eligible workers elect to purchase the Limited Benefit coverage.

Limited benefit plans may have their place in today's health insurance market, but it's important that small business employers know exactly what they're sponsoring when it comes to health insurance plans for their employees.