We think a good health-care plan should pay for necessary care without leaving you with lots of debt or high out-of-pocket costs. That includes hospital, ambulance, emergency-room, and physician fees; prescription drugs; outpatient treatments; diagnostic and imaging tests; chemotherapy, radiation, rehabilitation and physical therapy; mental-health treatment; and durable medical equipment, such as wheelchairs. Remember, health insurance is supposed to protect you in case of a catastrophically expensive illness, not simply cover your routine costs as a generally healthy person. And many individual plans do nowhere near the job.
For decades, individual insurance has been what economists call a "residual" market—something to buy only when you have run out of other options. The problem, according to insurance experts we consulted, is that the high cost of treatment in the U.S., which has the world’s most expensive health-care system, puts truly affordable, comprehensive coverage out of the reach of people who don’t have either deep pockets or a generous employer. Insurers tend to provide this choice: comprehensive coverage with a high monthly premium or skimpy coverage at a low monthly premium within the reach of middle- and low-income consumers.
More consumers are having to choose the latter as they become unemployed or their workplace drops coverage. (COBRA, the federal program that allows former employees to continue with the insurance from their old job by paying the full monthly premium, often costs $1,000 or more each month for family coverage. The federal government is temporarily subsidizing 65 percent of those premiums for some, but only for a maximum of nine months.) Consumer Reports and others label as "junk insurance" those so-called affordable individual plans with huge coverage gaps. Many such plans are sold throughout the nation, including policies from well-known companies.
Aetna’s Affordable Health Choices plans, for example, offer limited benefits to part-time and hourly workers. We found one such policy that covered only $1,000 of hospital costs and $2,000 of outpatient expenses annually.
The Clausens’ AARP plan, underwritten by insurance giant United Health Group, the parent company of United Healthcare, was advertised as "the essential benefits you deserve. Now in one affordable plan." AARP spokesman Adam Sohn said, "AARP has been fighting for affordable, quality health care for nearly a half-century, and while a fixed-benefit indemnity plan is not perfect, it offers our members an option to help cover some portion of their medical expenses without paying a high premium."
Nevertheless, AARP suspended sales of such policies last year after Sen. Charles Grassley, R-Iowa, questioned the marketing practices. Some 53,400 AARP members still have policies similar to the Clausens’ that were sold under the names Medical Advantage Plan, Essential Health Insurance Plan, and Essential Plus Health Insurance Plan. In addition, at least 1 million members are enrolled in the AARP Hospital Indemnity Insurance Plan, Sohn said, an even more bare-bones policy. Members who have questions should first call 800-523-5800; for more help, call 888-687-2277. (Consumers Union, the nonprofit publisher of Consumer Reports, is working with AARP on a variety of health-care reforms.)
United American Insurance Co. promotes its supplemental health insurance as "an affordable solution to America’s health-care crisis!" When Jeffrey E. Miller, 56, of Sarasota, Fla., received a diagnosis of prostate cancer a few months after buying one of the company’s limited-benefit plans, he learned that it would not cover tens of thousands of dollars’ worth of drug and radiation treatments he needed. As this article went to press, five months after his diagnosis, Miller had just begun treatment after qualifying for Florida Medicaid. A representative of United American declined to comment on its products.
Even governments are getting into the act. In 2008, Florida created the Cover Florida Health Care Access Program, which Gov. Charlie Crist said would make "affordable health coverage available to 3.8 million uninsured Floridians." But many of the basic "preventive" policies do not cover inpatient hospital treatments, emergency-room care, or physical therapy, and they severely limit coverage of everything else.
