Understanding The Appeal of Mini-Meds

I first ran this post four years ago, but thought it worth re-running considering all the recent debate about mini-meds in the era of PPACA.

I’m not enthusiastic about Mini-Med plans –the policies that offer limited coverage, often capped at $25,000 to $50,000 per year. In some ways they are the opposite of insurance because they pay for routine expenses but don’t cover catastrophic ones. In fact, I’ve come out repeatedly in favor of scrapping insurance for routine costs, like prescriptions.

I first ran this post four years ago, but thought it worth re-running considering all the recent debate about mini-meds in the era of PPACA.

I’m not enthusiastic about Mini-Med plans –the policies that offer limited coverage, often capped at $25,000 to $50,000 per year. In some ways they are the opposite of insurance because they pay for routine expenses but don’t cover catastrophic ones. In fact, I’ve come out repeatedly in favor of scrapping insurance for routine costs, like prescriptions.

I have to admit there’s another side to the story, and admit that my personal perspective on this has been colored by the fact that I can afford traditional coverage.
The Wall Street Journal ran a very informative piece on page 1, today (Covering the Uninsured, But Only up to $25,000). It focuses on Tennessee’s state-sanctioned mini-med coverage, CoverTN, and repeats some of the common criticisms:

Alan Sager, a professor of health policy at Boston University, calls the Tennessee plan “flimsy insurance” that will merely “provide cover for employers to save money.” Adds University of Tennessee medical-school professor David Mirvis, “It may be better than nothing, but it’s not real insurance.”

These experts are right.

On the other hand:

…Gov. Bredesen says he listened to focus groups and queried blue-collar folks, such as a waitress at a waffle restaurant, to devise his plan. “They weren’t interested in buying insurance for catastrophic events. They wanted access to the emergency room next month, access to the pharmacy next month,” he says. “Let’s give people what they want instead of what some advocate says they want.”

What Bredesen understands, but Sager and Mirvis downplay, is that a $10,000 or $25,000 or $50,000 debt falls into the “catastrophic” category for a lot of people. It can mean filing for bankruptcy or taking many years to dig out of debt. There’s not such a big difference between owing $50,000 and owing $1 million. Both amounts are in the category of not being repayable. Many people who run up debts of either amount are going to be eligible for Medicaid in any case.
On the other hand, if a person of modest means buys a comprehensive policy, it’s likely to be expensive and have high deductibles and co-pays. In addition to having to scrape together the money to pay the premium every month, a moderately expensive episode of care could still end up causing financial hardship or ruin.

For example:

Sherry Slatton, 46, a nine-year veteran in the Pepper Patch kitchen, dropped her comprehensive health insurance through her husband’s employer. The couple enrolled in the CoverTN plan, and their monthly cost will drop to about $175 from $350. Ms. Slatton wasn’t happy with the old coverage, which she says stuck her with $4,000 in charges when she underwent surgery to remove a benign cyst.

There’s also a stigma associated with being uninsured, and Mini-Meds address that, at least to some degree:

Ms. Robinson, the 23-year-old kitchen worker, figures it can’t get any worse than being uninsured. A nonprofit clinic recently told her she couldn’t get an appointment for a sinus problem for three weeks. Last summer, she went to a hospital emergency room for an infection. She says she was treated rudely, never saw a doctor and couldn’t get a prescription for an antibiotic from a nurse. Now, she’s paying $47 a month to the hospital to pay off her $3,000 debt. Her CoverTN premium is $41 a month.

“You walk in the hospital without insurance, it’s like you don’t even matter,” says Ms. Robinson.

I still dislike Mini-Meds –especially those sold by companies that engage in deceptive marketing practices– but we should acknowledge that not everyone who buys them is irrational or uninformed.