Limited voluntary benefit plans ease health care cost burden

A growing number of employers are offering voluntary benefits that help employees cope with rising medical costs.

In particular, employers are offering disease or critical illness policies, which provide lump sum payments upon the diagnosis of a particular disease, and "mini-med" policies, which are limited plans designed for part-time, seasonal or temporary employees, or for the small employers that may not offer an employer-paid medical coverage plan.

Disease policies provide employees with a lump sum payment upon the diagnosis of a major illness, such as life-threatening cancer, heart attack, kidney failure, stroke, organ transplant or paralysis, among others. Observers note that unlike low-deductible plans, these policies can be used in conjunction with employees' health savings accounts without jeopardizing their tax-free status.

The cost of $10,000 in disease coverage for a single, 35-year-old nonsmoker ranges from about $7 to $13 monthly, said Frank J. Fimmano, New York-based senior vp at Aon Consulting.

Policy limits, though, can be significantly higher. Randall Stram, Bridgewater, N.J.-based vp, employee paid products, for Metropolitan Life Insurance Co., said MetLife's policy can provide between $10,000 and $100,000 in coverage, with no deductible.

"Someone diagnosed with one of those several conditions receives a lump sum payment to use any way they choose," whether it is for a second opinion, to make their homes wheelchair accessible, or to cover the cost for leaving the country to receive medical treatment, said Mr. Stram.

He noted that MetLife requires employers that offer these plans to also have underlying comprehensive medical coverage for their employees.

A related policy is medical bridge or gap plans, which provide lump sum benefits to employees for hospital confinements or outpatient surgeries, and are designed to cover the gaps left by high deductible plans, say observers.

These mini-med plans cover basic medical services, including physician visits and prescription drugs. Mr. Fimmano said these policies have annual maximums of anywhere from $5,000 to $50,000 and will include components such as in-hospital treatment, hospital room and board, outpatient treatment and X-rays. But they have "serious limitations," such as, for example, a maximum of five doctor visits per year, with a $15 co-pay.

Mini-med plans have had a "very significant increase in activity" over the past couple of years, said Mr. Fimmano.

As employers find the cost of providing health care coverage to their employees "becoming between very expensive to prohibitive, it's become a good way" for the employer to provide access to affordable coverage to its employees, said Phil Grece, New York-based vp and product manager for Flex Shield, a mini-med plan, in American International Group Inc.'s accident and health division, who noted that in many cases employers will make a contribution to the plan's costs.

Gisele Sampson, manager, benefits and HRrisk, at Sumner, Wash.-based REI Inc., an outdoor gear and clothing retailer, introduced such a program to its 4,500 part-time, seasonal and temporary workers last year through an Aetna Inc. unit.

The program offers $10,000 in benefits, which was based on a study by REI that indicated 89% of the claims in its major medical plan were less than $5,000, said Ms. Sampson.

Ms. Sampson said to encourage enrollment, REI subsidizes 60% of the program's cost. Employee response to the program was "huge," said Ms. Sampson. It was "greatly appreciated," she said, noting that more than a quarter of eligible employees have chosen to participate.