UNHEALTHY HEALTH INSURANCE POLICIES

By the time election day rolls around we will have had our fill of discussions on health insurance. Who should have it? Who should pay for it? Debate after debate will leave us reeling with an overdose on the subject. But there's another---and perhaps more important aspect---in the area of health insurance. It's this: If you do have a policy, and you're relying on it to pay your medical costs whenever the need arises, what assurance do you have the the company will honor your claim? Don't be too sure. In my right hand I am holding a flyer that came in the mail three days ago from an insurance company called Health Net. It's touting a Medicare supplemental plan, and inviting people to attend a "free informative seminar", at which a "sales representative will be present with information and applications." Health Net is no fly-by-night company. It's one of the biggest health insurers in California. In my left hand I am holding the front page of the Los Angeles Times from three days ago, and a headline reads: "Insurer Loses, alters course." The article tells of a woman who had breast cancer, and who was in the middle of a course of chemotherapy, when her health insurance company cancelled her policy leaving her with $129,000 in unpaid medical bills. She had to stop her chemotherapy for months until she finally found a charity that would pay for it. The woman took the insurance company to court, and in a private arbitration the company was ordered to pay her $9 million! The name of the insurance company? Health Net. "WE PROMISE WE WON'T DO THAT AGAIN?" Health Net has been under investigation by a number of agencies, as have other health insurers. Health Net was accused of paying bonuses to employees who racked up a lot of policy cancellations. The policies themselves are reportedly filled with enough legal gobble-de-gook to have people unwittingly sign applications saying they have not had pre-existing conditions, when in fact they had. The woman in question in this case had her policy cancelled because, Health Net claimed, she had falsely stated that she had not had pre-existing conditions, the later discovery of which voided the contract. She claimed that the insurance agent came into her place of work and HE filled out the application while she worked, so she didn't know what she had committed herself to. The judge said that she was right. $9 million right. According to the Times, Health Net has promised to review all of its cancellation protocols, and to cease offering cancellation bonuses to employees. Clever lawyers can write a short paragraph in an insurance application giving the company the right to cancel if an applicant denies having had pre-existing conditions, and then the conditions appear, or if the applicant otherwise answers questions in ways subject to interpretation. And trust me, such clauses can be worded diabolically, to favor the company in the most ambiguous circumstances. The promise may be well and good for all future policies, but it's not clear what, if anything, the company will do about their existing policies. The case at hand was not unique. There are other lawsuits pending against Health Net, including one class actions case involving 1,600 other people who claim they were cancelled out. Health Net claims that they can't operate profitably if they're required to pay claims based on false or misleading information, or if they are required to insure all members of a group, including many who might be sick. In other words, "We can't make a buck selling health insurance if we have to cover sick people." Then what's the purpose of having health insurance in the first place? TIPS TO PROTECT YOURSELF If you have a health insurance policy, whether with a group or privately, read the policy carefully Yes, it's a real chore, but a necessary one. Pay particular attention to the cancellation clauses, and if you think there's ambiguity there, contact your state's Department of Insurance and/or Consumer Protection agency for some guidance. If your plan comes from work, your Human Resources people ought to be able to help you. If you're shopping for a new policy, ask hard questions of the salesman on this point, and don't take "Don't worry" for an answer. I think I'll skip the free seminar. What would you do? This article supplements Chapter 17 of "Personal Finance," pages 494-504. Access the text by clicking on the box in the right column.