Limited medical plans have, over the last few years, become mainstream products. The need for affordable alternatives to comprehensive major medical increases every year. Health care premiums continue to rise at an alarming rate. Average premiums since 2000 have increased by 87%.¹ By comparison, during the same period, cumulative inflation was up 18% and cumulative wage gains totaled 20%.

More and more employers and individuals are simply unable to afford full comprehensive coverage. The national average annual premium for employer-based health insurance is now $4,242 for a single employee and $11,480 for a family. These numbers, it is worth noting, are heavily weighted by the costs for larger employers which are lower than the average. In the small group and individual markets, although not separately quantified, premiums are clearly higher than the average. Also, health costs are very regional; so, in many urban areas, premiums will be substantially higher.

In 2006, only 61% of all employers provided or offered health insurance coverage (down from 69% in 2000). And, the coverage gaps are even more apparent when the number of employees in the firm is taken into account. While only 8% of those who work in larger firms (50+ employees) are not insured by their employer, the percentage of uncovered workers increases dramatically as the size of firm goes down:

• 13% are uninsured in firms with 25-49 employees;
• 27% are uninsured in firms with 10-24 employees; and
• 52% are uninsured in firms with 3-9 employees (note: 59% of all firms fall into this category and they employ approximately 20% of all workers in the country).

A further opportunity exists because of the lack of coverage for the rapidly growing number of part-time, seasonal and contract employees. Nearly all traditional group health plans limit eligibility to full-time employees. So, when a firm reports that it provides health insurance, that doesn’t necessarily mean that all of its workers are covered. Only 35% of the firms where part-time employees make up a third or more of the workforce reported that they offer health benefits to these employees. Unionized companies are an exception with 91% providing health benefits.

The 47 million uninsured amount to nearly 16% of all Americans. This varies widely by state from a low of 8.2% uninsured in Minnesota to a high of 23.9% in Texas.²

The young predominate among the working uninsured. Over 50% of the uninsured are under age 35. In addition to being younger, other characteristics of the uninsured are that they often work in part-time and lower wage jobs, have less education and are more likely to be Hispanic.

Among the uninsured working age population (18-64), 17.2% work full time, 22.1% work part time and 26.1% do not work. In fact, part-time workers make up 19% of population but are 28% of the uninsured.

The Kaiser survey also shows that employers who do provide health insurance are seriously looking at significantly increasing deductibles and copayments as their primary strategy to reduce costs. This creates another opportunity for limited medical plans to be positioned as base coverage under these new, less-comprehensive major medical plans.

Overall, of the 47 million uninsured Americans, 27 million have jobs (19 million full-time and 8 million part-time).³ 41% of all working Americans do not have health insurance through their employers. That’s our target market – 27 million people. Our limited medical product is designed for these people.

For the working uninsured, this kind of plan is a major improvement, allowing access to a doctor or the emergency room when symptoms first appear.

The uninsured can be found both in small companies which offer no health plan and in large companies which offer major medical benefits. In the latter case, they are the people who are not considered benefit-eligible or, more likely, those who do not participate in the plan because they cannot afford their share of the premium. A limited medical plan, offered side-by-side with a major medical plan, can offer these people a viable alternative.

Part-time workers, especially, are among the best prospects. They are usually uninsured but are often invisible to agents, brokers and benefit consultants who are traditionally focused on benefit plans for full-time employees. They represent a relatively untapped market totaling approximately 8 million people.

A word of caution: limited medical should generally not be sold as a replacement product for groups which already have comprehensive health insurance. As premiums continue to rise rapidly, some employers, in an effort to cut costs, have made efforts to substitute these types of programs for comprehensive major medical plans. In our experience, this generally does not work well for the employer. Employees in these circumstances see the new plan as an unacceptable step-down and employee morale has often been devastated in companies which have tried to do this. We suggest that you advise your customers to carefully consider the potential pitfalls of these “rescue” plans.

Expand your horizons, be on the lookout for the working uninsured, and you will find new prospects anxious for this kind of coverage.

¹ Unless otherwise cited, the source for statistics in this article is the Kaiser Family Foundation’s Employer Health Benefits Survey 2006.

² Source: PBS.ORG The Uninsured In America April, 2007

³ Source: National Coalition On Health Care 2007 Fact Sheet

                                                - Affinity Group Underwriters June, 2007