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Limited-Benefit Plans
Limited-benefit or “bare bone” plans reduce premiums by decreasing the number of covered services in comprehensive health benefits plans. Depending on the state, these types of plans can be referred to as bare bones, mandate-light, mandate-free, limited benefit, minimum benefit, flexible benefit, etc.
For more than three decades, states have mandated that private carriers cover certain benefits or the services of specific types of providers, including chiropractors, nurse practitioners, clinical psychologists, psychiatric social workers, and acupuncturists. While mandated benefits vary from state to state, the most common are mammography and diabetes supplies. A 2003 GAO report found that seven states each had 30 or more benefit mandates, while five states each had fewer than 10.1
Because most large employers are self-insured and therefore are not subject to state-level mandates, state mandates principally affect the small group and individual markets—which states have increasingly targeted in their strategies to make health insurance more affordable.2 To encourage small employers to offer coverage, and individuals to take it up, many states have enacted legislation allowing insurers to offer plans with no or only some state-mandated benefits.3
The value of limited-benefit plans as a strategy to reduce the number of uninsured is a matter of debate. Much of the debate hinges on the impact on the insurance market—specifically, whether limited-benefit plans create a new coverage alternative for uninsured individuals or simply crowd-out those who previously had comprehensive health insurance.4
Although limited-benefit plans do reduce costs, they do so only marginally, on average reducing the premium between 5 and 9 percent. Even these savings may be offset, however, since individuals holding bare-bones policies often access uncompensated care services through the safety net.
To date, limited-benefit products have not sold well. Many insurers are reluctant to sell bare-bones policies, and consumers are uninterested in buying them. Since these efforts are new, they may develop more successfully given time and greater familiarity with limited-benefit products.
IN-DEPTH: Limited-Benefit Plan Resources
Cubanski, J. and H. Schauffler. “Mandated Health Insurance Benefits: Tradeoffs Among Benefits, Coverage and Costs? " California Health Policy Roundtable Issue Brief, July 2002.
Chollet, D. “Employer-Provided Health Benefits: Coverage, Provisions, and Policy Issues Policy Study," Employee Benefits Research Institute, 1984.
Friedenzohn, I. “Limited-Benefit Policies: Public and Private-Sector Experiences," State Coverage Initiatives Issue Brief, July 2004.
General Accounting Office, Private Health Insurance: Federal and State Requirements Affecting Coverage by Small Businesses, September 2003.
Glied, S. et al. “Bare-Bones Health Plans: Are They Worth the Money? " The Commonwealth Fund, May 2002.
Health Policy Tracking Service, “Mandated Benefits: Legislative Overview," National Conference of State Legislatures Snapshots, March 3, 2003.
Riley, T. and B. Yondorf. "The Flood Tide Forum - Access for the Uninsured: Lessons from 25 Years of State Initiatives," National Academy for State Health Policy, January 2000.
Tollen, L. and R. Crane. “A Temporary Fix? Implications of the Move Away From Comprehensive Health Benefit," Employee Benefit Research Institute Issue Brief, April 2002. |
State |
Limited-Benefits Plan Description |
Arkansas |
The Health Insurance Consumer Choice Act of 2001 allowed health insurers and HMOs to offer health insurance plan options to consumers that include all, some, or none of the Arkansas coverage mandates; and requires certain disclosures to be made to consumers so they may make a fully informed choice of offerings. In addition, the legislation authorizes the Insurance Commissioner to issue rules or regulations to help reduce the cost of insurance and decrease the number of uninsured Arkansans.
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Colorado |
In 2003, the Colorado legislature passed HB 1164, which requires carriers in the small group market to offer one of three basic health benefit plans: Basic Health Benefit Plan without specified mandates; Basic High Deductible Health Benefit Plan; or Basic High Deductible Plan without specified mandates. |
Florida |
In 2002, the Florida legislature passed SB46E, which allowed a Health Flex Plan to be sold by insurers, HMOs, provider-sponsored organizations, and public or private community-based organizations as a pilot in areas of the state with a high uninsured rate. In 2004, legislation was approved allowing Health Flex plans throughout the state.
Health Flex can limit/exclude benefits required by law, cap the total amount of claims paid per year, limit enrollment, or take any combination of these actions. Health Flex plans may enroll individuals with family incomes no greater than 200 percent FPL and who have been uninsured for the past 6 months and are not otherwise eligible for public programs. Plans are free from all statutorily required health care benefit mandates. |
Georgia |
In 2005, Georgia enacted the Georgia Consumer Choice Benefits Health Insurance Plan Act which allows health plans to offer products without all of the state mandated benefit requirements. The act allows small businesses the opportunity to choose which type of health care coverage best suits their individual needs and level of affordability. |
Kentucky |
In 2005, the Kentucky legislature passed HB278, the Small Business Insurance Relief Act, which creates a state-established basic health benefit plan to make insurance more affordable by tailoring benefits to specific needs, creates a uniform system for physicians to receive credentials with insurers or hospitals, and establishes an advisory committee to help Kentucky provide patients with quality and cost information about their health care. The basic health benefit plan is available to individuals and employers with fewer than 50 employees. s |
Maryland |
The Minimum Benefit Legislation (SB 570), enacted in 2004, requires carriers who insure > 10 percent of the covered lives in the small group market to offer a limited-benefit plan. Other carriers may offer if they choose. The actuarial value of the limited plan cannot exceed 70 percent of the actuarial value of the comprehensive standard health benefit plan. The limited-benefit plan is only open to small employers with an average employee wage of less than 75 percent of the state average annual wage and who have not offered health benefits within the last 12 months. Limited-benefit plans became available to qualified small employers beginning July 1, 2005. |
Minnesota |
In 1999, the Minnesota legislature passed SF 84 which allowed for benefit plans that may alter or eliminate coverage that is required by law, other than the requirement that care provided for covered services such as osteopaths, optometrists, and chiropractors be reimbursed on a nondiscriminatory basis. No carriers ever sold the plans and the law was allowed to expire in 2003.
In 2005, the Minnesota legislature enacted a new law that allows health plans to sell "small employer flexible benefit plans" that do not include any of the benefit mandates (except maternity). |
Montana |
In 2003, the Montana legislature passed HB 384 which allowed for limited-benefit plans to be available to those who purchase health insurance in the individual market as long as they are notified which services are not covered and have remained uninsured for 90 days or more. Inpatient services are not covered in these plans. Insurers may also limit coverage for newborns, severe mental illness, emergency services, certain basic health services, and services provided by a certain category of licensed health care practitioners. Demonstrations may be renewed for additional 12-month periods for up to five years, effective until 2009. |
New Jersey |
In 2002, the New Jersey legislature passed legislation which required individual market carriers to offer a limited-benefit plan, called Basic and Essential Health Care Services Plan (B&E). The B&E plan provides for 90 days of hospitalizations, limited wellness and practitioner visit benefits, and some other limited benefits. The plan does not include some benefits typically covered by commercial plans such as chemotherapy, outpatient drugs, prenatal care, speech and occupational therapy, home health, or hospice services.
Carriers are able to use modified community rating for B&E plans; however, all other products in New Jersey are pure community rated. As of 2Q06, there were over 16,000 members enrolled in the B&E plan. |
North Dakota |
In 2001, the North Dakota legislature passed HB 1226, The Individual and Small Employer Health Insurance Act, which allows an insurance company to offer a basic health insurance policy to individuals and small businesses with 50 or fewer employees. |
Texas |
Beginning in 2004, Texas required all small employer insurance carriers to offer at least one plan offering all the mandated benefits by law, and at least one Consumer Choice Plan that may exclude or limit coverage of certain mandated benefits. Insurers are required to disseminate written disclosures listing the mandated benefits absent from the health plan. Some of the benefits which may be excluded or reduced include treatment for acquired brain injury; coverage for AIDS, HIV or related illnesses; chemical dependency treatment, or telemedicine/telehealth services. In addition, carriers may also charge higher deductible and coinsurance requirements than are allowed under traditional plans. In 2005, approximately 87,000 Texans were covered under the new Consumer Choice plans, including 7,300 people who were previously uninsured. |
Utah |
In 2002, the legislature passed HB 122, which permitted insurance carriers to offer coverage that is similar to what is covered under Utah 's 1115 Medicaid waiver (Utah 's Primary Care Network). |
Washington |
In 2004, Washington passed legislation redefining the small group market, changing group size to 2 to 50, from 1 to 50. The legislation also streamlines some administrative costs, protects portability of policies, and implements new rating factors for health insurance plans. Carriers are permitted to offer a limited- benefit package (replacing the previous requirement to offer a prescribed limited-benefit package that mirrored the Basic Health package.) |
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| 1 General Accounting Office, Private Health Insurance: Federal and State Requirements Affecting Coverage by Small Businesses, September 2003. |
| 2 Chollet, D. “Employer-Provided Health Benefits: Coverage, Provisions, and Policy Issues Policy Study," Employee Benefits Research Institute, 1984. |
3 General Accounting Office, Private Health Insurance: Federal and State Requirements Affecting Coverage by Small Businesses, September 2003. |
4 Ibid. |
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