Compounding the problem of limited policies is the fact that policyholders are often unaware of those limits—until it’s too late.
"I think people don’t understand insurance, period," said Stephen Finan, associate director of policy at the American Cancer Society Cancer Action Network. "They know they need it. They look at the price, and that’s it. They don’t understand the language, and insurance companies go to great lengths to make it incomprehensible. Even lawyers don’t always understand what it means."
Case in point: Jim Stacey of Fayetteville, N.C. In 2000, Stacey and his wife, Imelda, were pleased to buy a plan at what they considered an "incredible" price from the Mid-West National Life Insurance Co. of Tennessee. The policy’s list of benefits included a lifetime maximum payout of up to $1 million per person. But after Stacey learned he had prostate cancer in 2005, the policy paid only $1,480 of the $17,453 it cost for the implanted radioactive pellets he chose to treat the disease.
"To this day, I don’t know what went wrong," Stacey said about the bill.
We sent the policy, along with the accompanying Explanation of Benefit forms detailing what it did and didn’t pay, to Karen Pollitz, research professor at the Georgetown University Health Policy Institute. We asked Pollitz, an expert on individual health insurance, to see whether she could figure out why the policy covered so little.
"The short answer is, 'Beats the heck out of me,' " she e-mailed back to us. The Explanation of Benefit forms were missing information that she would expect to see, such as specific billing codes that explain what treatments were given. And there didn’t seem to be any connection between the benefits listed in the policy and the actual amounts paid.
Contacted for comment, a spokeswoman for HealthMarkets, the parent company of Mid-West National, referred us to the company Web site. It stated that the company "pays claims according to the insurance contract issued to each customer" and that its policies "satisfy a need in the marketplace for a product that balances the cost with the available benefit options." The spokeswoman declined to answer specific questions about Stacey’s case, citing patient privacy laws.
One reason confusion abounds, Pollitz said, is that health insurance is regulated by the states, not by the federal government, and most states (Massachusetts and New York are prominent exceptions) do not have a standard definition of what constitutes health insurance.
"Rice is rice and gasoline is gasoline. When you buy it, you know what it is," Pollitz said. "Health insurance—who knows what it is? It is some product that’s sold by an insurance company. It could be a little bit or a lot of protection. You don’t know what is and isn’t covered. Nothing can be taken for granted."
