The number of Americans paying more for health insurance policies that cover less has increased 60 percent since 2003, a troubling trend that is exacerbated by and contributing to the economic crisis according to a national report released today by Community Catalyst in collaboration with Health Access California and Consumers Union.
“When Coverage Fails: Causes and Remedies for Inadequate Health Insurance” can be found at www.communitycatalyst.org/assets/pdfs/WhenCoverageFails.pdf. It outlines the implications of a growing “underinsurance” problem and urges government leaders to act to ensure families who purchase insurance get the coverage they need.
At a press conference this morning, Assemblymember Dave Jones (D-Sacramento), Chairman of the Assembly Health Committee, said “Consumers should know that their health insurance coverage will be there for them when they need it. Increasingly expensive health insurance policies that don’t cover the basic needs of policyholders threaten the financial and physical well being of California families. The medical debt incurred by many who purchase these policies harms our already weakened economy. We need common-sense protections that limit the financial risk to families and give them the tools to make good decisions. My bill, AB786, would set standards so that consumers could make apples-to-apples comparisons and it would limit the sale of “junk” insurance.”
Approximately 6 million Californians —one in five insured adults—are underinsured, a problem that is made worse by the down economy. Many insurance plans are marketed as financial protection in case of major medical needs, but have such extreme gaps in coverage that consumers are effectively paying to be uninsured. Some plans that are marketed as “catastrophic” coverage, but which only pay for care delivered on an inpatient basis, even though 80% of medical procedures, including surgery, chemotherapy and dialysis, are now done in outpatient settings. Other forms of “junk” insurance include plans that do not cover hospital care, or that cover only a tiny fraction of the cost of hospital care, which can easily run to $5,000 a day.
That is what happened to Laura Burwell, a small business owner in Chico, who spoke this morning. When Laura retired from her corporate job of 30 years and became part owner of a small wine shop, she purchased health coverage through a broker, who promised that her new coverage was comparable to the comprehensive plan she had had through her employer. In 2008, Laura was bitten on the finger by a rattlesnake while weeding in her backyard, and spent twenty-nine hours in the local Intensive Care Unit. Her bill came to for over $73,000. Her insurance covered just $3,000 of that bill, leaving Laura in significant debt.
Most people who are underinsured don’t know they’re underinsured until they’re in debt, said Laurie Sobel, Senior Attorney for Consumers Union, the publisher of Consumer Reports magazine. “Many people who think they have adequate health insurance actually have coverage so riddled with loopholes, limits, exclusions, and gotchas that it won’t come close to covering their expenses if they fall seriously ill,” Sobel said. The May 2009 issue of Consumer Reports includes an investigation into junk insurance, and identifies seven warning signs that a plan might be junk. “7 Signs a Health Plan Might Be Junk,” can be found at www.consumerreports.org/health
Small business owners face a high risk of being underinsured, said John Karatzas, California Project Director of Small Business Majority, which is supporting AB786. “Small business owners are the ones out there trying to buy coverage in the individual market,” said Karatzas. “They know how to crunch numbers better than most, and even they can’t figure out what their options are, because different plans have different deductibles, co-pays, out-of-pocket maximums, benefits, and networks. AB786 is a commonsense reform that will help small business.”
Assemblyman Jones’s bill, AB 786, would:
· Require all health plans to be classified into five tiers. Consumers would be able to know if a certain plan is a top-tier comprehensive plan, or a bottom-tier “bare bones” plan, or something in between.
· Require insurers to offer one “benchmark” plan in each tier. Consumers would be able to make cross-insurer,apples-to-apples price comparisons with the confidence of knowing that benchmark plans in a given tier have similar cost-sharing and benefits. The benchmark plan would be the lowest-price plan in each tier.
· Weed out “junk” insurance. The bill would require all plans, including bare-bones plans, to at least cover doctors’ visits, hospital and preventive services; no more “hospital only” plans could be sold. The bill would also direct state regulators to set overall limits on out-of-pocket costs.
In addition to its work at the state level with AB786(Jones), Health Access California is working with the national Health Care for America Now! campaign for federal health reform that provides for quality and affordable coverage for all Americans. As several speakers said, individual consumers should not be left all alone at the mercy of the big insurance companies. Health reform needs to include strong oversight of the insurers to ensure basic standards of coverage.