Underinsured health insurance consumers suffer more risk than the uninsured

Limited liability insurance plans may cover
hospital admission but very little else

A mostly hidden but extremely alarming fact is that many Americans who think they have health insurance may not actually have useful coverage.  I was painfully reminded of this yesterday as I read a story  in the New York Times.

It detailed the plight of Lawrence Yurdin, a 64-year-old computer security specialist. Although the brochure on his policy from Aetna seemed to indicate it covered up to $150,000 a year in hospital care,  the fine print excluded nearly all of the treatment he received at a hospital in Austin, Texas

Sadly, Mr.Yurdin and his wife were forced to file bankruptcy when the unpaid hospital bills for several heart surgeries reached $200,000.

A recent study published in the American Journal of Medicine found that 61% of all bankruptcies were due to unpaid medical bills. Even more alarming, most of the debtors were well educated and three quarters of them had some kind of medical insurance.  The study was a joint effort by David Himmelstein MD, Deborah Thorne PhD, Elizabeth Warren JD and Steffie Woolhandler MD, MPH.  It  further found that bankruptcies caused by medical bills rose by 50% between 2001 and 2007.

Why exactly did Mr. Yurdin’s  “health insurance plan”  fail him so badly?

The answer lies in the complexity of the kinds of health insurance plans and who is selling them. I personally sell Aetna products, both individual and small group.  When Aetna introduced a “new product” a few years ago that was less expensive and guaranteed issue, I thought that would fill a real need in the market place.  I read the policy description and spoke with the department handling the new product.

The product was a limited liability product, probably the product purchased by Mr. Yurdin.   The coverage was severely limited in scope and coverage.   My personal choice was not to sell this product because I felt that consumers would not understand how the coverage worked.

It should be noted that Mr Yudin got this coverage through what on the surface looked like an employer sponsored  group plan. The company Mr. Yurdin worked for contracted individuals for short periods to service other businesses.  As a contractor, not an employee, Mr Yurdin’s company did not offer benefits but gave their contractors “access” to individual policies with limited benefits. A spokesman for the company said they did not make the offered plan sound like “regular coverage.” 

But how could it not?   As I have said before, health insurance is contract. The terms are clearly set out but it is rare that the ultimate consumer, like Mr. Yurdin,  ever really sees or reads the whole contract.

In my opinion, it is the responsibility of the benefits department of the employer or the selling agent to make sure consumers understand exactly what they are buying.  In this case, because Mr. Yurdin was not an “employee” there was no one watching his back and making sure he clearly understood what was an what was not  paid by the insurer.

Most of the limited liability policies are written by companies that few people have ever heard of.  I use some of them because sometimes there is no choice. The most critical failure of the U.S. health insurance market is the inability of persons with pre-existing conditions to buy individual policies. 

Limited liability  policies differ greatly.  Some do pay for surgical procedures, some  do not.   Limits vary.   I believe that Mr. Yurdin’s problem was exacerbated because of the identity of the insurer.  Aetna is the third largest insurer in the country.   It is reasonable that someone would think that Aetna’s coverage would be better than  the unknown XYZ Insurance Company’s coverage.   It might not be true but that would be the reasonable expectation.

Aetna is not the only major carrier that sells these limited liability policies. I was working with a client this morning and discovered that  Blue Cross of  Florida   also writes this  kind of plan.    A Blue Cross on line description makes the plan sound very appealing. 

I quote:

“Essentials – Routine Care is a limited benefit plan, which means you’re not paying for benefits you don’t think you’ll use, and your [sic] covered when you really need it. Plans offer benefits for a limited number of child and adult physician visits per calendar year, plus hospital benefit options up to $25,000. Adult and child wellness and routine care coverage and pharmacy is also included.”

These plans are routinely sold to individuals. If the actual limitations of the plan are not carefully explained, there will be a lot more Mr. Yurdin’s in the future.  Getting advice from someone who can adequately explain what a consumer is buying is the only way a consumer can reasonably understand what he has purchased.