December 1, 2010
Opponents Take Aim at Limited Health Plans
By REED ABELSON

Maybe something isn’t always better than nothing.

Or so went the argument offered by Senator John D. Rockefeller IV, the West Virginia Democrat, in a hearing on Wednesday about a controversial kind of health plan that seems destined to remain on the market for the next several years.

More than a million Americans enrolled in these plans think they have health insurance to protect them from financial catastrophe if they become seriously ill or hurt, Mr. Rockefeller said. “In fact, they don’t,” he said.

“It’s worse than nothing because of the false expectations and the false hope,” Mr. Rockefeller said.

He and other proponents of the new health care law are voicing concerns about the Obama administration’s recent decision to allow these plans, known as limited benefit or mini-med policies, to escape some of the legislation’s early requirements.

Taking the opposite view of Mr. Rockefeller, administration officials contended that coverage provided by these policies was better than nothing at all, and promised that more comprehensive plans would be available through state exchanges in 2014, when all plans will have to comply with the law.

Companies like McDonald’s, which was one of the first to seek a waiver from the new rules so it could continue offering plans that offer as little as $2,000 a year in benefits, say these plans are often the only affordable alternative for many of its part-time or low-income workers.

Critics, including Mr. Rockefeller, say people buying these policies often have no idea of how limited the coverage is. They say the employers and insurers, which include major companies like Aetna and Cigna, do not always make it clear to a worker that these policies will not protect them if they develop an expensive medical condition.

What is more, many of these plans are designed in such a way to pay less than the amount they say they will cover. While a policy might promise coverage up to $50,000 a year, for example, the fine print may actually limit what it will pay toward doctors’ visits at just $2,000 or a hospital stay at $250 a day. People who become seriously ill or hurt can end up with tens of thousands of dollars in unpaid medical bills.

“The language in these policies can be very confusing and lead people to believe they have insurance coverage or security if they experience illness or injury,” said Mark Rukavina, the director of the Access Project, a not-for-profit group in Boston that helps people who accumulate large sums of medical debt.

At the hearing, for example, Eugene Melville, a retail worker in California who bought a limited-benefit policy from Aetna, testified about his experience after learning he had oral cancer. While he said he understood that the policy was capped at $20,000 a year, he discovered that it paid only $2,000 for doctors’ visits and care provided outside a hospital.

Others claim to have been similarly surprised. “In no way did I expect the bill that arrived,” said Jessica Lynn Carroll, 30, a resident of San Jose, Calif., who also bought an Aetna policy. When she had to go to the emergency room because she lost feeling in one of her arms, she found her Aetna policy paid only $500 toward the bill. She ended up owing more than $16,000. “If I had known the insurance I had in the first place was absurd, I wouldn’t have purchased it,” said Ms. Carroll, who said the hospital has agreed to significantly reduce her bills.

At the hearing, McDonald’s insisted that its workers knew what they were paying for. “McDonald’s works hard to make sure that its employees understand the coverage limitations as well as the benefits provided by these plans,” testified Rich Floersch, an executive vice president at the company, who said about 90 percent of those enrolled never reached the limits.

Employees pay $11 a week, nearly $600 a year, for coverage that is capped at $2,000, Mr. Floersch said, and they can pay more for plans that limit benefits at $5,000 or $10,000 a year. McDonald’s also says it offers a more comprehensive — and more expensive — plan.

Aetna says its materials are clear. “We want people to know what they’re buying. We recognize that health insurance is complex and we have continually improved our member materials to make them clear so they are not surprised by the limited benefits in these plans,” the company said in a statement.

Cigna also defended the plans, saying they are a choice for people who cannot afford more comprehensive coverage. The company “is committed to helping our customers understand benefits plans before they purchase them,” Cigna said in a statement. “We work to educate our customers about how to best use their benefits after they enroll.”

But insurers also emphasize that customers should be sure to understand what they are buying. “Any consumer should know exactly what benefits their coverage provides before purchasing a policy,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade association. Even policies that provide as much as $1 million in coverage may limit the amount they will pay for specific services.

The federal waivers are only good for a year, and regulators say they plan to ask the plans for more information so they can decide how to handle these policies. Administration officials also say they plan to make sure the insurers are clear that the policies do not meet the requirements of the federal law

“We are working to bring unprecedented transparency to the insurance market, and improve the quality of health insurance, while helping to ensure that people can keep the coverage they have,” said Steve Larsen, director of the Office of Oversight in the Health and Human Services’ Office of Consumer Information and Insurance Oversight. “As part of this effort, we will be requiring insurance companies that offer mini-med plans to tell consumers in plain language that their plan has limited coverage.”

Still, some consumer advocates say individuals may sometimes be better off if they have no insurance at all. If they are uninsured, they may qualify for deeply discounted or even free charity care from the hospital, which they might not get if they had some kind of coverage. “For some people, frankly, they may be better off with no coverage if this is the alternative,” Mr. Rukavina said.

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