"Mini-Med" plans have low premiums, but can be a road to bankruptcy

Here’s a worry.  Some states are starting to offer “mini-med” policies for those who can’t afford “traditional” insurance.  Tennessee has a health plan with a cap of $25,000, which began after the collapse of the massive expansion of TennCare a few years ago.  Now, Washington State put out an RFP for insurers to provide an insurance plan with a $75,000 cap on benefits.  WSJ article  Puget Sound Business Journal 

The good news about these “mini med” plans is that they are cheap – the Washington plan is supposed to retail for $100 a month.  That’s nice for young healthy folks –especially the immortal ones who know for certain that nothing bad will happen.  These plans also probably select against those with existing illnesses, who know far too well how easy it is to rack up serious bills in our health care system.

The bad news: these plans basically offer no insurance for when people are especially sick – just when they need the coverage most.   “Mini-med” plans give their members access to the system – but the plans are a rapid route to medical bankruptcy if people get sick.  Many states (including Washington State) prohibit such plans – and proposed health care reform would not consider this kind of a plan to meet “minimum credible coverage” standards.

 “Mini med” plan could be a good complement to a community-wide “reinsurance”  program that covers all (or almost all) bills in excess of some set amount.   This suggestion was part of the Kerry health care plan in 2004, and Katherine Swartz of Harvard School of Public Health has written a book on the subject.  High cost “shock” claims are rare and somewhat random – so spreading the risk for these as widely as possible makes policy sense.   However, putting in place obviously inadequate plans that leave the truly sick without any coverage is a bad policy idea, and it’s depressing to see state governments heading in this direction.