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Issue Brief
May 2009

CoverTN: A Closer Look

In an attempt to cut health care costs, some states allow insurers to develop what are called “limited benefit,” “defined-benefit,” or “barebones” health plans. Experts define limited-benefit plans as those that “require high cost-sharing, exclude coverage of some services, or both.” 

At first glance, limited-benefit plans may appear to be low-cost versions of standard health plans, but a closer inspection reveals that many provide so little protection that they are not really insurance at all. Although they may appear to save money, limited-benefit plans can be very costly to consumers—especially those with health problems or low and moderate incomes.

In this brief, we examine Tennessee’s barebones plan, CoverTN. CoverTN is a state-designed and state-subsidized plan. It is a useful case study of limited-benefit plans, illuminating several problems that other states may experience if they adopt such plans. These problems include:

  • Consumers’ health needs may quickly exceed restrictive coverage or service limits
  • Consumers may face high costs due to a lack of caps on out-of-pocket spending
  • Plans may fail to meet the needs of targeted low- and moderate-income, high-risk populations
  • Enrollment may be low due to consumer skepticism
  • Provider participation may be inadequate