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Cheap Insurance Can Kill You

Aug. 1, San Jose Mercury News

Doug Christensen owned a welding and fabrication company, but he didn't have health insurance. So he was intrigued when he was offered a plan promoted by a sales agent for the National Association for the Self-Employed, a non-profit with 200,000 members. The agent assured Christensen that he'd be fully covered even if his cancer, in remission for seven years, returned, according to court records. But three months after signing up, Doug’s bone cancer came back. His policy, issued by Mega Life and Health insurance, covered only 17 percent of his medical bills. By the time he died two years later, his wife was left more than $500,000 in debt. "We thought we had a good policy," said Dana Christensen, "We really did."

As health insurance premiums continue to soar, more small-business owners and individuals are looking for affordable plans. It's a need filled by outfits like the National Association for the Self-Employed, which touts itself as the "leading resource for the self-employed" and businesses with fewer than 10 employees. But concerns also are on the rise. Consumers may assume that by obtaining a health plan through an association, their pre-existing conditions are covered, as they would be in many group plans. But policies sold through associations often exclude pre-existing conditions and are increasingly being scrutinized by state regulators and are subject to litigation from disgruntled policyholders. Over the past two years, UICI and Mega have faced 15 lawsuits in California over their marketing and insurance practices, and relationship to the National Association for the Self-Employed and a similar organization, according to the Securities and Exchange Commission filings.

Members of such associations get access to health insurance as one of their membership benefits. Some say these association health plans are merely doing what no one else will do -- offer affordable health insurance in a country where an increasing number of people have to fend for themselves. "The notion that you get health insurance through your employer is being strained by the way the labor force is changing," said Merrill Matthews, director of the Council for Affordable Health Insurance, a business trade group. Legislation passed this week in the U.S. House of Representatives, and supported by the Bush administration, would exempt association health plans from many state regulations, a move federal officials believe would allow more people access to some form of health insurance. But state insurance commissioners believe this could hurt consumers.

California Insurance Commissioner John Garamendi said the problem is that it's entirely legal for companies to offer limited coverage. He refers to such policies as "slimmed down plans" and said they're a typical feature of association health plans. "There's no requirement that it provide comprehensiveness or pay a percentage of hospital care," said Garamendi, who launched an investigation into association health plans two years ago.

PS: Your best defense is a knowledgeable Independent Agent, who can help you understand the pro’s and con’s of association health plans. Paul Harrison and Patty Feathers are waiting to hear from you.

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