Health bill stokes fears of ‘junk insurance’

Part of provision would let vendors sell bare-bones coverage policies

Julie Arkison remembers what it was like to buy health insurance before the Affordable Care Act created standards for coverage.

The policy she had was from the same insurer that covers her now, but it did not pay for doctor visits, except for a yearly checkup and gynecological exam.

“I couldn’t even go to my regular doctor when I was sick,” said Arkison, 53, a self-employed horsebackriding teacher in Saline, Mich.

The plan did not cover her exams before and after hip surgery, her physical therapy after her operation, the crutches she needed while she recovered, or any of her medications. She estimates she spent $20,000 on medical care in the seven years before she could buy a plan through the marketplaces created by the Affordable Care Act.

As Senate Republican leaders struggle to secure enough votes to repeal and replace the health law, the centerpiece of their effort to win conservative support is a provision that would allow insurers to sell such bare-bones plans again. The new version of the bill released Thursday incorporates an idea from Sen. Ted Cruz of Texas that would permit insurers to market all types of plans as long as they offer ones that comply with Affordable Care Act standards.

State insurance regulators say the proposal harks back to the days when insurance companies, even household names like Aetna and Blue Cross, sold policies so skimpy they could hardly be called coverage at all. Derided as “junk insurance,” the plans had low premiums but often came with five-figure deductibles. Many failed to pay for medical care that is now deemed essential.

On Friday evening, the insurance industry’s two main trade associations, America’s Health Insurance Plans and BlueCross BlueShield Association, sent a letter to the Senate voicing adamant opposition to the plan, which they say would create two distinct markets. The proposal “is simply unworkable in any form and would undermine protections for those with pre-existing medical conditions, increase premiums and lead to widespread terminations of coverage for people currently enrolled in the individual market,” the groups wrote.

Limits to payments

Ned Scott, 34, who lives in Tucson, Ariz., said the health plan he had before the Affordable Care Act left him with $40,000 to $50,000 in unpaid medical bills after he learned he had testicular cancer when he was in his late 20s.

“I thought it would cover things,” Scott said. But once he needed it, he learned the plan limited what it paid for outpatient care to $2,000 a year, and all of his treatment seemed to fall in that category.

Plans with much lower premiums are certain to be attractive to many people.

But Elizabeth Imholz, a health policy expert for Consumers Union, warned, “The reality for consumers is that they can be stuck with huge, unexpected out-of-pocket costs.”

The Republican proposal also encourages the sale to small businesses of cheaper, less-comprehensive plans modeled after association health plans that were in vogue decades ago, allowing associations or groups of like businesses to come together to buy insurance.

The Republican bill would allow small businesses and people who are self-employed to buy plans that would be largely exempt from the current Affordable Care Act rules as well as state oversight.

That, too, has drawn concern. The National Association of Insurance Commissioners, which represents state regulators, wrote a letter to the Senate contending that the provision “appears to block the ability of states to preserve important consumer protections, effectively oversee the plans, or ensure a level playing field.”

Misleading policies

Antony Stuart, a lawyer who lives in California, has brought more than a dozen lawsuits accusing insurance companies of misleading consumers by selling them policies that provided much less coverage than they realized.

Stuart recalled one case involving a man, Doug Christensen, who bought a policy from Mega Life and Health Insurance, which was the subject of numerous lawsuits and state regulatory actions. Christensen, who previously had bone cancer, was assured by the insurance agent selling the policy that he would have adequate coverage if the cancer returned. But the plan limited payments toward chemotherapy to just $1,000 a day of treatment when the actual cost was sometimes 10 times that amount. Christensen was left with nearly $500,000 in unpaid medical bills.

“These plans lacked the necessary transparency that would give consumers an idea of what they were actually purchasing,” said Ashley Blackburn, a senior policy analyst with Community Catalyst, a consumer advocacy group.

People buying plans now benefit not only from the standards the federal law sets but also from the fact policies are clearly divided into categories with set levels of coverage.

“We’re really moving back to a market where people are going to have a hard time reading through their plan options,” Blackburn said.