Even cheap junk is still junk…

“Maybe something isn’t always better than nothing.”

That’s the appropriate lead sentence in a New York Times article by Reed Abelson, detailing a Senate Commerce Committee hearing today that investigated so-called mini-med health plans–or “junk insurance” plans that offer so little coverage, you might as well have been uninsured and saved the premium dollars. The article features two Californians who got shocking bills after thinking they were covered.

“Crap insurance” is what Tim Noah at Slate magazine bluntly calls it, when he’s not using the term McSurance–specifically for the coverage provided by McDonald’s that was the focus of the Senate hearing yesterday–like “fire-insurance policy that covers only the items on your front stoop.” One of their options for workers cost $710 per year in 2008 but had an annual benefit ceiling of $2000–which wouldn’t cover a day in the hospital, and probably not even an ER visit, and for any additional costs, the patient would be back to being uninsured.

The hearing included California Senator Barbara Boxer, who according to Modern Healthcare, criticized McDonald’s for picking up only 10% to 20% total premiums for their hourly workers, but paying 80% of total premiums for corporate employees. “I think you ought to take a look at that,” Boxer said. “That just makes my heart beat fast, and not in a good way.”

At the state level, we worked–unsuccessfully, to date–to eliminate such “junk” insurance, which seems to provide no value for the premiums paid. For those who argue it is the only option that low-income families can afford–it is exactly families on limited incomes that should be protected from scams like this–the promise of coverage yet the same prospect of facing debt and bankruptcy, despite the price of the premium with preciously limited dollars. We salute Assemblywoman Wilma Chan, Senator Darrell Steinberg, Assemblyman Dave Jones, and Senator Elaine Alquist for all authoring bills on this subject against tough insurance company opposition.

David Williams at the Health Business Blog struggles to argue that at least in these “junk” plans, the low-income family will get the insurance company’s group discount, rather than the sticker price of 3-4 times the standard cost of care. We at Health Access are very aware that typically those with the least are charged the most–but two wrongs don’t make a right. The solution is to fix those problems as well–which is why in California, we helped passed AB774(Chan) to prevent hospitals–from collecting more than the Medicare or Medicaid rate for services to those under 3.5 times the poverty level. [AB1503(Lieu) places similar caps on charges for ER doctors.]

The good thing is that we have a solution–under the new federal health bill, minimum benefit standards will all but eliminate “junk” health insurance in 2014. And with subsidies available for low- and moderate-income families, there won’t be any justification to keep sub-prime products on the market. It’s one of the big victories in the Affordable Care Act.

The question is what to do until 2014. McDonald’s and other employers and insurers have applied for waivers from some of the federal law’s consumer protections that are being implemented early–notably the elimination of annual and lifetime caps on coveage, and the “medical loss ratio” that ensures dollars go to patient care and not administration and profit. The Obama Administration has thus far grant limited one-year waivers.

It may be appropriate for there to be some phased-out transition to 2014–but it’s certainly clear that some of these products provide no value, and as a basic consumer protection should be taken off the market like other defective products.

UPDATED: The U.S. Senate Commerce Committee has a trove of good information on this subject that came out of the hearing.

Health Access California promotes quality, affordable health care for all Californians.

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