‘Junk insurance’ comes back to haunt its policyholders

http://www.mcclatchydc.com/2013/12/19/212069/junk-insurance-comes-back-to-haunt.html

By Tony Pugh
McClatchy Washington BureauDecember 19, 2013

April Capil has mixed feelings about the national outcry over canceled health insurance policies.

Five years free of the stage III breast cancer that nearly claimed her life, the Boulder, Colo., resident is once again healthy, but she’s still struggling to put her life back together.

Like millions of Americans, Capil thought she had solid individual health insurance. Then she got sick and found that her coverage was woefully inadequate.

The financial problems that followed would aggravate Capil’s health struggles, force her into bankruptcy and trigger a fraud lawsuit over $230,000 in unpaid medical bills against HealthMarkets Inc., the parent company of her former insurer.

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Now Capil, a software project manager, wonders how many Americans will use the president’s canceled-policy “fix” to unwittingly renew another year of “junk insurance” like she used to have.

“It’s sad that there are people who have this insurance who don’t know that they’re going to end up like me if they ever get sick,” she said. “I feel like people are upset that they’re losing these plans and they’re upset because they think their plans are comprehensive. But they aren’t. These insurance companies have been selling Americans coverage that will bankrupt them if they ever have a serious illness.”

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Capil thought her plan was a good deal. She said her insurance agent told her it was full, comprehensive coverage and if she ever got cancer, Capil would never pay more than a deductible or co-insurance.

What she got instead was a “limited benefit plan,” which is “commonly seen as inadequate because it tends to pay for routine care and leave you without coverage fairly soon if something major costing tens of thousands of dollars kicks in,” said Ed Haislmaier, a senior research fellow for health policy at the Heritage Foundation, a conservative Washington think tank.

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Capil’s experience is cautionary. Most people don’t realize their policies have coverage limitations until they actually need the coverage.

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“They do cover a wide range of things,” Haislmaier said, “but with very low benefit levels. So they wouldn’t turn you away saying, ‘You have a heart condition. We only cover cancer.’ They turn you away saying, ‘You exceeded your $50,000’” coverage limit.

That’s what happened to Mike Adams, a 61-year-old restaurant owner and career guidance counselor in Ramona, Calif.

Only three days after complaining of chest pains in late 2011, Adams was preparing to undergo quadruple heart bypass surgery with his wife, Theresa, by his side. As she followed his gurney into the operating room area, a frantic hospital clerk came running up the hallway in hot pursuit.

“They chased down Theresa, following me into the operating room, pulled her aside, and she’s scared to death already, and then they just hollered out, ‘Mrs. Adams! Mrs. Adams! You have terrible insurance. We’re going to have to get a check from you right now.’ They wanted the entire deductible right there,” Adams said.

Unable to come up with $3,600 on the spot, Theresa Adams convinced the staff to go ahead with her husband’s surgery. She paid the deductible with a credit card the next day.

After 11 days in the hospital, Adams had racked up about $240,000 in medical bills. But his insurance from Mid-West National Life Insurance Co. of Tennessee, a subsidiary of HealthMarkets, wouldn’t cover roughly $193,000 of the charges.

Adams thought his insurance provided comprehensive catastrophic coverage with generous benefits for major medical episodes. Like Capil, he, too, said his insurance agent assured him that it did. But Adams’ plan capped payment for “miscellaneous” hospital inpatient charges at $18,000 – and most of his costly care had been lumped into that vague category.

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Adams’ realization that he had junk coverage was a complete shock. He said he had paid his premiums for seven years and had never filed a major claim.

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Along with improperly denying benefits, Capil and Adams accuse HealthMarkets and its agents of deceptive marketing by misrepresenting the terms of their policies and obscuring the policies’ coverage limitations in confusing contract language.

“Their claim is ‘Oh, you should have read all of the fine print and understood it,’” Adams said. “I’m supposed to understand that? You have to be a doctor and an attorney to understand it. And by the way, you have to be an insurance underwriter also because you can’t understand the legalese. You can’t understand the medical terminology. And you can’t understand the insurance industry. And that’s what they expect you to do.”

Adams is not alone, said Rukavina, the Massachusetts health care consultant who spent more than 20 years in the nonprofit health sector helping people who were let down by their coverage.

“These junk policies have been crafted pretty carefully,” he said. “When I talked to people and they shared their contracts with me, the language can be very confusing, even for somebody like me.”

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About three months into her treatment, Capil realized that her hospital bills were piling up. Then her insurance company denied payment for her lumpectomy surgery, claiming it was a pre-existing condition, even though the lump was non-cancerous when she bought the policy.

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