Hammett Blog - Interesting Articles and Opinion Pieces

As brokers, we’re always on the lookout for innovative solutions to help employers meet Affordable Care Act (ACA) requirements—especially in industries with high turnover and tight margins. But not all solutions are created equal. One increasingly popular option, the voluntary MEC (Minimum Essential Coverage) plan, may seem like a cost-free, compliance-friendly fix—but it comes with serious risks.

Here are three critical reasons to think twice before recommending a voluntary MEC plan:

1. The Wraparound Trap

Voluntary MEC plans often include “wraparound” benefits—coverage for accident-related care or complaint-driven treatments—to make the offering more attractive. These benefits are typically insured under group risk pricing, but when paired with a self-funded MEC, they’re often overpriced to account for adverse selection (a common issue in voluntary plans).

Worse, the self-funded MEC collects employee contributions into a claims fund. If unused funds aren’t returned 100% to the plan, it could trigger a Department of Labor (DOL) audit—an outcome no employer wants. And if claims exceed the available funds, the employer may be on the hook to cover the shortfall, exposing them to unexpected financial liability.

2. Misclassification Risks

Many of these wraparound benefits are filed and approved as group insurance plans, not as voluntary worksite products like AFLAC or Colonial. That distinction matters. Group plans are designed for employer sponsorship—not for individual payroll deduction. Misclassifying them can lead to compliance issues and undermine the advantages of offering a true group health plan.

3. Lost Employer Value

One of the most overlooked benefits of sponsoring a group health plan is its impact on employee retention. Studies consistently show that the cost of turnover far exceeds the modest investment in a basic group health plan—often under $100 per employee per month, even if fully employer-paid.

When employers opt for a fully voluntary plan, they forfeit the retention, morale, and productivity gains that come with offering a sponsored benefit. In high-turnover industries, that’s a costly mistake.

Final Thoughts

Voluntary MEC plans may promise compliance at no cost—but the hidden risks and missed opportunities make them a poor choice for employers who want to use benefits strategically. Our advice remains the same: cut costs elsewhere, but invest in your people when it comes to health coverage.

A well-structured, employer-sponsored plan isn’t just a compliance tool—it’s a business advantage.

 Access Based Health Insurance

As you all know, our industry is currently experiencing a period of rapid and intense activity. Health insurance has become a priority for many politicians, civic leaders, and reporters who, until now, may not have given the topic much thought—unless they or a loved one were in need of medical care. This eBook aims to clarify many of the lesser-known or misunderstood concepts within our industry, providing a practical tool for discussion, marketing, and reference.

Many of you are already familiar with terms like MEC, Limited Medical, MVP, Hospital Indemnity, and Skinny Plans. In this document, we aim to define these terms and assign a more universal designation to better consolidate and identify these various plans. We hope to refer to any plan that offers first-dollar (no deductible or coinsurance) coverage as "Incentive Based." Conversely, we will classify plans designed more traditionally, based on financial barriers to control utilization, as "Disincentive Based." Both fully insured and self-funded plans will fall into one of these two categories.

This eBook includes details on the following subjects:

- Definitions and examples of best-in-class Incentive Based plans

- New business acquisition strategies

- Leading carriers and plan sponsors

- Turnover reduction strategies

- Common mistakes we all make with non-traditional plans

- Existential threats to our industry and your livelihood

- Client retention and sales

Despite the ongoing debate and speculation, brokers and their agencies must continue to grow and thrive through acquisition and retention. In this eBook, we have compiled a series of marketing strategies specifically targeting the needs of an underserved yet rapidly growing market segment: low-wage hourly service employees.

Feel free to explore any of the sections for use as a reference tool, marketing guide, or training resource for your new associates. We also welcome your feedback and look forward to serving you as a valued consultant. As always, our services come with no strings attached, and I do not charge fees, approach employers directly, or interfere with any carrier compensation arrangements.

Three Most Common MEC Plan Models

Private Label (Aggregated Service) Plans – Inherently more costly. Why? These plans are developed and distributed by sales and marketing organizations. Not being insurance companies, these organizations have little to no in-house administrative capabilities. These plans must import or contract out for administrative and customer services. Because these vital services are contracted, and each partner entity must build in profit margin, they will always be more costly and less effective than internal carrier services from a single source health plan.

TPA Plans – As it is with the private label plans (above) TPAs must go outside for many of the built-in customer-related services that insurance carriers already have. In addition to the cost of importing services, our experience shows that a TPA will tend to overprice administrative services when they are linked to a MEC plan. It is our theory that TPA’s discovered early that you could double or triple normal per member fees when you connect these fees to a MEC product. In order to supplement the MEC preventive-only coverage, TPAs also must either contract with insurance carriers or self-fund them. Once the MEC Plus basic services are built out and margins are accounted for, the plans are more costly than a single platform insurance company-sponsored plan.

Beware of the TPA who sells MEC Only option. Although technically compliant with the employer mandate (4980H(a) This is the surest way to force employees away from company-sponsored plans and into a state/federal exchange. Two reasons for avoiding the MEC Only option (1) Exorbitant administration fees. Upwards of 70% of the cost goes into fixed costs and profits for the TPA (2) A MEC Only option does little or nothing to curb turnover or employee loyalty since it provides only preventive services.

Single Platform Carrier Plans (preferred) – Single source carrier sponsored MEC Plus plans will always deliver a higher benefit to dollar value due to built-in economies of scale (shared services) An insurance company that focuses on this market will staff and train dedicated employees to better understand how the plan works and are better able to communicate this to the member. Better customer support and lower margins result in economies of scale and a better value proposition. Therefore, we would, in most cases, recommend this model over the others described above.

NOTE - Certain carriers will outsource paper to either a TPA or Private Label plan, in these instances, the economies of scale, that a carrier would normally enjoy have been lost. Care should be given to identifying Single Platform Carriers from those who “rent paper” to private label or TPA plans, these "rental plans" lose all the economies noted when they rent paper to a private entity. 

Economics: According to a 2017 U.S. Census Bureau report, 25.0 percent of Hispanics, in comparison to 14.7 percent of non-Hispanic whites, worked within service occupations. 21.9 percent of Hispanics in comparison to 42.9 percent of whites worked in managerial or professional occupations. Among full-time year-round workers in 2017, the average Hispanic/Latino median household income was $49,793 in comparison to $65,845 for non-Hispanic white households. In 2017, the unemployment rate for Hispanics was 6.0, as compared to 4.2 for non-Hispanic whites. In 2017, the U.S. Census Bureau reported that 19.4 percent of Hispanics in comparison to 9.6 percent of non-Hispanic whites were living at the poverty level.

Insurance Coverage: It is significant to note that Hispanics have the highest uninsured rates of any racial or ethnic group within the United States. In 2017, the Census Bureau reported that 49.0 percent of Hispanics had private insurance coverage, as compared to 75.4 percent for non-Hispanic whites. Among Hispanic subgroups, coverage varied as follows: 46.7 percent of Mexicans, 54.6 percent of Puerto Ricans, 55.9 percent of Cubans, 41.9 percent of Central Americans. In 2017, 38.2 percent of all Hispanics had public health insurance coverage, as compared to 33.7 percent for non-Hispanic whites. Public health insurance coverage varied among Hispanic subgroups: 38.4 percent of Mexicans, 45.1 percent of Puerto Ricans, 35.6 of Cubans, and 34.4 percent of Central Americans. Those without health insurance coverage varied among Hispanic subgroups: 19.3 percent of Mexicans, 7.9 percent of Puerto Ricans, 13.7 percent of Cubans and 27.2 percent of Central Americans. In 2017, 17.8 percent of the Hispanic population was not covered by health insurance, as compared to 5.9 percent of the non-Hispanic white population.

Partial Solution: Pan American (Hispanic Owned and Controlled) specializes in providing employer sponsored health plans that not only meet ACA compliance regulations, but are culturally sensitive, offering benefits for repatriation, in case of death and patient advocacy (direct negotiations) to assist covered families in reducing out of pocket costs for non-covered or partially covered benefits.

 Estimated cost of single-payerr (Medicare for all) 3 trillion per year. (As a point of reference, the federal government spent less than $4 trillion in 2016, and ran a deficit of $587 billion, even after the Obama tax increases "on the rich." Where would that ocean of necessary cash come from? ) No private health insurance companies "big profits" are not the problem (In 2009, Forbes ranked health insurance as the 35th most profitable industry, with an anemic 2.2 percent return on revenue. The pharmaceutical industry was in third place, with a 19.9 percent return, and the medical products and equipment industry was right behind it, with a 16.3 percent return) No, the government is not more efficient (Forty percent of U.S. healthcare spending — more than $1 trillion per year — produces no care) No, it will not provide better access (the government has only one method to control costs: medical rationing. It cuts reimbursement schedules to providers, limits payments to institutions, and denies authorization for expensive treatments) redistributing US wealth does not add to the value of our nation in any way and most certainly does not solve the "health care" problem.