What is a limited benefits health insurance plan?

Consumers who do not have standard health insurance have the option of purchasing a limited benefits plan. These types of health insurance options are exactly what their name implies- an insurance product that provides only a limited amount of benefits in exchange for a significantly lower cost.

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Some experts in the health insurance industry see limited benefits plans as supplemental products designed to complement comprehensive insurance. Others view them as an alternative to comprehensive insurance for those who believe something is better than nothing. Either way you look at it, the important thing about limited benefits health plans is that you do your due diligence in researching them before you purchase one. There’s nothing worse than finding out after an accident or illness that your insurance won’t cover the cost.

Are there specific types of limited benefits plans?

There are both general and specific limited benefits health insurance plans. The more general plans are similar to major medical policies except that they have much lower annual limits and higher deductibles. A general plan may cover hospitalization, for example, but only up to a limit of $5,000 or $10,000. You could exhaust that amount after just a couple of days in the hospital.

There are more specific plans the target certain things like cancer treatment, accidents incurred during travel, and so on. The specificity of these plans makes them extremely affordable. On the other hand, should you never have any expenses related to the type of coverage purchased, it could be money down the drain. But it’s no different than paying for car insurance all your life and never filing an accident claim.

Are there any downsides to limited benefits plans?

There are some common benefits of health insurance which may be missing from a limited benefit plan. However, there are a couple of other things you need to be aware of, not the least of which is the fact that the terms and conditions of some of these plans make them extremely prohibitive.

For example, you may purchase a plan that offers coverage for cancer treatment. However, a given plan might limit your coverage to only certain types of procedures. Remember that terms and conditions are everything.

Another big problem with these types of plans is the fact that they offer considerably fewer consumer protections when compared to standard health insurance.

While it’s true that all insurance products are regulated at the state level, these bare bones policies are such that they are not covered by all of the usual government regulations for health insurance companies.

That means if you have some sort of dispute with the insurance provider you may have no legal recourse. The National Association of Insurance Commissioners recommends you seriously consider all the potential pitfalls before purchasing a limited benefits plan.

Do employers offer limited benefits plans?

According to an August 2010 report published by Kaiser Health News, limited benefits plans are gaining in popularity among employers because they are relatively inexpensive. They enable employers to choose group health insurance business options  with a significantly lower cost that they can then supplement with a limited benefits plan. In some cases the combination of the two products is still less expensive than purchasing a single comprehensive plan.

Kaiser further points out that the regulatory changes set to be implemented in 2014 will make limited benefits plans even more attractive. They suggest the possibility that many small businesses will drop their health care coverage as a means of saving money, yet avoid the fine imposed by the federal government by offering a limited benefits plan.

For larger corporations able to take advantage of purchasing power to provide less costly health insurance plans, limited benefits plans are sometimes offered as an extra benefit to attract the best employees. In such cases the plans are offered as supplements to already existing coverage. It’s not uncommon for employers to be able to subscribe to the supplemental plans for as little as $10 to $15 per month.

When it comes right down to it, individual consumers will have to ask themselves whether a little insurance is better than no insurance at all. Depending on your individual circumstances and health needs, a limited benefits plan may or may not be appropriate for you.

Whether you’re looking for comprehensive coverage or a limited benefits plan, use the FREE search tool to find online health insurance quotes by entering your ZIP code right now!