Health Policies Stripped Down - Cheaper Insurance Plans Attract Some Workers, But Benefits Are Limited
By DIANE LEVICK
Hartford Courant
December 26, 2006
An inflamed gallbladder shot pain through Jeannie White's body, leaving her breathless at times, but it was a health insurance surprise that crushed her emotionally and slammed her financially.
Just a few days before gallbladder surgery, she found out from a hospital that the little-known kind of policy she bought 2½ years ago would cover only a small portion of the bills. She will pay thousands of dollars out of her own pocket because the policy caps payouts for various services at very low amounts.
"I cried for two days because I didn't know what I was going to do," said White, an instrumentation technologist in Lake Jackson, Texas, who had to have her gallbladder removed before it ruptured. "I was just devastated. I was angry."
White, 34, has a "limited benefit plan," which employers increasingly offer hourly, part-time and temporary workers, and insurers such as Aetna and CIGNA see as a growing opportunity.
In a nation of 46.6 million uninsured, including 407,000 in Connecticut, the plans have spurred impassioned debate about the question "Is something better than nothing?" and whether they're a good step toward universal health care.
The plans' premiums are thousands of dollars cheaper than regular health insurance, sometimes costing less than $1,000 a year for an individual. That is important because workers often pay the entire cost of this kind of policy. Some employers pay a small portion.
The trade-off is that the plans cover much less than most employer-based policies. The low-benefit plans may have annual ceilings on what they will pay for all services combined, and those caps can range from $1,000 to $50,000 or more. Other plans may have one cap for inpatient services and another for outpatient care.
Even more confusing for some consumers, the policies typically have other limits within the caps. For instance, one policy offered by Aetna, which says it will pay up to $7,500 a year per person for inpatient care, limits payment for hospital room and board to a maximum of $250 a day.
Not all buyers may understand that limited benefit plans, unlike high-deductible health insurance or home and auto coverage, aren't meant to cover life's catastrophes. Insurers insist their marketing doesn't try to portray the plans as comprehensive coverage for serious illness.
Instead, insurers say the plans encourage people to get routine and preventive care so they don't end up with catastrophic medical bills. They also market the plans as a way for employers, big and small, to attract and retain employees.
Insurers view the plans as one solution for some of the nation's uninsured, and insist employers aren't using them to replace traditional insurance and save money.
"We offer them because we believe that in the long run, they provide some level of service for people who would otherwise not be covered and would have a whole host of inconveniences if they were to approach the system uninsured," said Mark T. Bertolini, Aetna's head of its regional businesses, referring to debt and collection agencies.
Critics of limited benefit policies, however, say they're bad public policy and potentially misleading to consumers.
They say that in acute or chronic illness, the plans leave big bills for the people who can least afford them - workers who couldn't afford better insurance in the first place.
In addition, the plans barely cover the many benefits that states mandate because the annual caps are too low, critics charge.
"We don't think they're effective in fixing the system, and I don't think they're effective in helping people stay healthy," said Beverly Brakeman, director of the labor and community coalition called Citizens for Economic Opportunity.
CEO sued Aetna in October, claiming the limited polices were misleading, and named Insurance Commissioner Susan F. Cogswell as a defendant for approving the policies. The suit is pending in Hartford Superior Court.
Credible data are hard to find on how widespread limited policies are. CIGNA HealthCare estimates a little more than 1 million Americans now have them, and that the market is growing 15 percent a year.
Brakeman acknowledges the plans may help people get some preventive care, but says, "The gamble is you're not going to get sick."
Devilish Details
Brakeman and others are also troubled that many workers appear to be buying the plans without understanding them.
"In many instances, people don't know what they don't have," she said. "These plans, if you look at them, are purposely confusing to consumers."
White, the gallbladder patient in Texas, says she didn't know her plan had a $1,000 annual cap on outpatient benefits and $7,500 on inpatient benefits when she bought it through an employer from Strategic Resource Co. - a firm Aetna later acquired.
She says the one-page summary of benefits she got before the purchase didn't list caps, and though she asked SRC for a full description, she never got it.
White figures she owes more than $8,200 in hospital, doctor, and test charges. Her gallbladder surgery at a hospital was considered an outpatient procedure, and her policy has a much lower cap on outpatient than inpatient benefits.
She's now paying $200 a month on the hospital bill and modest installments on the doctor's bill.
"If it had been explained that it's partial coverage, I wouldn't have been so angry" about the insurance plan, said White. She's canceling the policy and expects to buy a broader plan from a different insurer.
Aetna says it has clarified the marketing materials for the SRC plans.
"It's very clear what they're buying," Bertolini said. "When we bought the company, we made sure that that stuff was squeaky clean."
He also said regulators, including the Connecticut Insurance Department, have been strict and specific about the disclosures required for consumers.
CIGNA says one reason it bought Star HRG in Phoenix, a firm that specializes in limited plans, this year is the time it spends carefully explaining the benefits before a consumer signs up.
"It is an absolutely bad outcome for us to sign somebody up in our plans under false pretense and have them come back three months later expecting a different level of benefit richness," said Chris J. Hocevar, CIGNA's senior vice president of emerging markets.
But Kevin Lembo, state healthcare advocate for Connecticut, worries that some people are so desperate for coverage that when they hear low numbers, "they're likely to gloss over the specifics."
In many cases, Lembo said, consumers would be better off setting aside the money they would have spent on limited-plan premiums for future medical bills because the payouts are so low. It would also be worthwhile for them to ask doctors and hospitals to reduce their usual charges for people without insurance, he said.
Insurers point out that when people buy limited benefit plans, their shares of medical bills are based on deeply discounted charges that physicians and hospitals grant the insurer.
A Growing Base
The plans appeal to employers ranging from Fortune 500 companies such as The Home Depot and Kelly Services to smaller organizations such as the Greater Hartford YMCA.
The plans have been around for many years, but employers' interest has been growing as they reduce their full-timers and increase their part-time workforces, insurers say.
The Greater Hartford Y is entering the fifth year of offering an SRC plan to more than 600 part-timers in 10 locations and "we're very upfront with them about this being a limited benefit plan," said Kristan Wright, its director of human resources.
The feedback from YMCA employees, who pay the whole premium, has been "very positive," and "any issue we've had with SRC, they've dealt with immediately," Wright said.
Only about 70 YMCA employees, have bought the insurance, but that's a higher proportion than is typical for such plans. Bertolini of Aetna says 5 to 6 percent is usual, but it can be 10 to 12 percent if employers pay at least a small part of the premiums.
Aetna says it's not actively selling the most maligned low-benefit plan - one that limits benefits to $1,000 a year - though some employers still have it.
Instead, the company says, its most typical limited plans include one that caps inpatient payouts at $2,000 a year per person, and another that caps them at $7,500. But they also have many other limitations.
Robert W. Davis of West Hartford didn't need the Aetna/SRC plans he was offered through Kforce Professional Staffing this fall but said he wouldn't have bought one anyway because they're not a good value.
The financial analyst fears many people of modest means may not figure that out until it's too late.
"This plan would be taking advantage of people who aren't informed enough to know this is a crappy health plan," Davis said.
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