Before you go on, for just a few minutes, let’s talk about how we label this kind of insurance. It is indicative of the evolving nature of the business that we do not yet have an agreed vocabulary for talking about these products.

“Mini-med” is a commonly-used term. We don’t like to apply that label to the coverage we offer for two reasons:

First, it’s not descriptive of the design we use. Some competitors (for example, Aetna/SRC) offer a product in this genre that could reasonably be called mini-med. It includes all of the usual features of traditional health insurance: deductibles, co-insurance, co-pays, payment based on usual, customary and reasonable fee schedules, etc – plus benefit caps and a relatively low overall maximum which is typically less than $20,000 and often under $10,000.

Our products are built on a different chassis. We provide fixed-amount payments to help the insured pay everyday medical costs. There are no deductibles or co-pays or other managed care devices. Our design could be referred to as “scheduled benefit” or a “defined benefit” but the use of “mini-med” is, we think, inappropriate.

You will also hear the phrase “indemnity” plan applied to our type of design although that, too, is a misnomer. Indemnity is a word that is most often used in health insurance to describe major medical plans that do not require the use of a network of certain doctors and hospitals. We invite confusion by applying the term to these products. Also, limited medical plans do not “indemnify” (i.e. make whole) the insured against loss which is the more common legal connotation of the word. No matter what you call them, all limited medical plans do is simply help the insured cover part of their everyday health care expenses. We need to be very honest with our customers about this.

The fixed-amount, scheduled benefit approach we chose is easier to understand and use. That is especially true because the majority of employees in these types of plans have often not been insured under or exposed to traditional, managed care policies. Understanding the difference between deductibles and co-insurance is, in itself, difficult. Figuring out why the doctor billed you for an additional amount because the insurance company didn’t pay all of the charges that exceeded the “reasonable and customary” limits is even less understandable. The end result is often deep customer dissatisfaction, a feeling that the insurance didn’t cover what you were led to believe it would. The design we use helps to reduce that problem because it tells the covered employees, in plain language, what the plan is going to pay.

There is also another important reason that we prefer the fixed-amount design. It helps achieve rate stability which is very important to employers. Medical inflation affects the mini-med design. As the cost of medical services rises, the claim amounts for mini-med plans go up too – albeit not as fast as the increases for major medical. Employers, and employees, are very wary after so many years of rapidly increasing health insurance premiums. A fixed-amount design plan, on the other hand, is insulated from medical inflation. A $60 office visit payment this year is still $60 next year, regardless of what the doctor charges. In fact, we have never had to impose a rate increase in all the time that we have been in this business. That counts for a lot with most employers, especially smaller companies.

Second, the use of “mini” is just not good marketing or good branding. It demeans the product. The implication is that we are offering an inferior plan. Who wants to buy the mini version of just about anything – except maybe a mini-skirt or a Mini Cooper? In fact, about the only effective use of “mini” in a marketing sense might be the Mini Cooper. There is no larger or better Cooper automobile. The name Mini Cooper is a positive way to draw attention to perceived strengths – its small size for urban driving and the economy of operating it. All that the use of ‘mini med” can do is invite a comparison to major medical. The market for this product is people who don’t have access to major medical for whatever reason. There is no reason, therefore, to use a term that portrays the product to them in a negative light.

                                                - Affinity Group Underwriters June, 2007