Watch out for junk health insurance

Millions of Americans have unknowingly signed up for "junk" health insurance, plans that seem to be attractive because they have low premiums, but in fact have coverage so skimpy they often won't cover even basic medical expenses.

Some of those plans, known as mini-meds, are operated by employers and brand-name insurance companies with special dispensation from the federal government. Others, such as health discount cards and fixed benefit indemnity plans, from companies you've probably never heard of, are so meager that regulators don't consider them to be health insurance at all—though that's frequently not clear to consumers. And some of the companies operate one step ahead of the law.

Here are eight warning signs that a plan you're considering might be junk:

• Vague, generic-sounding names. Fixed-benefit indemnity and discount card plans are often sold under generic sounding names like USHealth Group, Health Care One, and Allied Health Benefits. When in doubt, check with your state's insurance department.
• A required membership in an association you've never heard of. This one is tricky. Reputable associations, such as business associations or professional groups, can and do arrange for major medical insurance for their members. But the "association" you're asked to join as a condition of buying a junk plan may exist mainly to sell you insurance, not for any other reason, and a significant portion of your monthly payment may be going to the association, not toward your actual policy benefits.
• Guaranteed acceptance. Until 2014, real health insurance companies can continue to turn away people with pre-existing conditions for individual plans. Any plan other than a high-risk pool or Pre-exisiting Condition Insurance plan that lets you enroll even if you are in poor health is almost certainly junk, carefully structured to limit the plan's maximum payout to a few thousand dollars.
• A bargain-basement premium. There are no bargains in health insurance. A plan generous enough to cover the policyholder's medical needs has to collect enough money to do that. The only safe way to lower your premium is to get a plan with a higher deductible.
• "Not major medical." If you see that phrase, beware. The policy is not comprehensive health insurance.
• Discounts of "up to" a certain amount. Hucksters know that real insurance often pays a substantial percentage of your bill, often 80 percent. They'll toss around percentage terms to make you think that's what you're getting with a discount card. You're not.
• No deductible. Junk marketers also know consumers hate deductibles, so this promise goes up front. They don't tell you that their maximum payout tops out at only a few thousand dollars.
• It's marketed as "Obamacare." A lot of people are still unsure about the provisions of the health reform law. Marketers take advantage of that by using pictures of the American flag or the White House to suggest their plans are the "affordable care" promised by the new law. They're not. Those come in 2014.