An Open Letter: Health Care Reform Needed, Two Perspectives

September 21, 2009

The time for medical insurance reform is long past over due.  I write as an insurance agent for the past 28 years and as a consumer.  If you are lucky enough to have insurance, how confident are you that the coverage will be there for you when you need or want it?

In my experience, with clients under age 65 seeking insurance coverage, companies providing individual and family medical coverage turn down about one third of applicants as uninsurable.  They accept one third of applicants and the other third simply cannot afford the coverage.  This is insurance roulette and the insurance companies currently have complete control of the roulette wheel. 

You do not need to have a very serious medical condition to be denied coverage these days.  Clients with controlled hypertension and slightly elevated cholesterol levels will be denied coverage.  Folks with asthma or allergies who need prescriptions to control symptoms will be turned down for insurance coverage.  Living here in the San Joaquin Valley it is hard to find families where at least one member does not have some treatable medical condition that would on the surface seem not to propose undue risk to the insurance company.  Families somewhat understandably walk away from coverage when one family member is denied coverage contributing to the 47 million uninsured. 

While the art of “cherry picking” only the healthiest of applicants has been nearly perfected by the insurance industry, there are of course folks who eventually have a serious disabling accident or develop a major costly medical condition.  So companies have devised ways to get those folks “off the books” as well.  One technique is to continually propose “new and improved” plans.  Folks with a good claim experience will be allowed to move to the new and improved plan.  Those of course with poor claim histories are left in the expensive claim pool.  Rates are then adjusted based on a plan’s claim history.  The folks in the high risk pool are forced to accept escalating premiums or drop their medical coverage.  Both ways, the insurance company wins and the consumer loses.

It is amazing to me to see the insurance companies paying out over 1.4 million dollars a day to defeat medical insurance reform and then turn around and make public pronouncements that they are really in favor of industry reform.  If they truly supported insurance reform they would have taken the responsibility of changing and humanizing the industry before being faced with long overdue government imposed reform. They want reform on their terms and reform that will keep their current monopolistic advantages in place in the under-age and group markets.  I have seen companies fight even the most minor reform bills proposed in our State Legislature and engage their army of insurance agents to help them maintain the status quo.

If you think insurance companies are consumer oriented, take a good look at their practices of denying coverage, rating policy premiums, eliminating coverage for pre-existing conditions, providing substantial waiting periods before coverage is effective and cancelling coverage when hit by a significant claim within the first 2 years of holding a policy.  In the past year, 3 of the largest individual and family medical insurance carriers in California have been hit with millions of dollars in fines for cancelling policies due to claim filings within the first year of the policy and they were forced to reinstate those policies.

Ask most medical providers how much money and time they spend appealing denied claims for care provided to their patients.  Ask providers how often the insurance bureaucrats come between them and the care they provide to patients.  Most will tell you that insurance-company interference in their practice and the cost of insurance paperwork to appeal and justify claims is substantial.

I focus my insurance practice on two products that have very strong consumer protections.  One is a long term care product called the California Partnership for Long Term Care that is sponsored by the State of California.  The other is Medicare Supplement plans that have strong federal controls limiting plans to 7 fully standardized plans that do not allow for insurance company manipulations.  Both of these plans are provided by private insurance companies but are strongly regulated to protect the consumer.  These protections are not currently available to consumers purchasing individual or group medical plans.

As an under-age-65 consumer of medical insurance coverage, I have personally experienced the daunting issues faced by American families with regards to the medical coverage minefield.  And I meet these folks in my business daily.  It is a non-system that can leave people without their group coverage at anytime.  Consumer protections can be in the end, non existent. Any of us covered by group insurance can lose our job, our company can go bankrupt, our company can cancel our group plan or we can be forced to retire due to illness or disability.  In addition, I meet many people who want to retire but keep working only to maintain their medical insurance coverage.  The odds of getting private insurance coverage if you are between the ages of 55 and 64 are almost slim to none in my experience.  Most folks in that age range are in the eyes of the underwriters of medical insurance carriers too great a risk to provide them coverage.

 About 5 years ago my wife and I had our group insurance coverage cancelled by the company providing our insurance.  The company no longer wanted to incur the bottom line expense of providing medical insurance coverage for the employees even though their share of the premium was at the bare minimum allowed by law.  At the same time, my wife was diagnosed with an advanced stage cancer.  Since the insurance was cancelled by the employer, one protective insurance portability mechanism called COBRA was not available to us (COBRA is not available if the group plan is cancelled).  If you do qualify for COBRA it will only cover 18 months in most circumstances when it is available to you.   Because 5 years earlier I had experienced a mild cardiac event with no damage to my heart, I was still unable to qualify individually for medical insurance and of course my wife being actively treated for cancer at the time was uninsurable as well.

Our only option to get medical coverage was to apply for what is called a HIPPA plan.  The premium for this plan for the two of us was $1650 per month or over $19,000 per year.  The plan had a $2500 deductible and a $10,000 stop loss per person.  For the next four years between the premiums, deductibles and out of pocket co-pays we spent over $30,000 per year for our medical care even with insurance coverage.  For many families I meet, that is a substantial part of their annual income and would be impossible for them to maintain insurance at the cost levels we experienced.  

We did have the best medical care to be found and fortunately we were able to find the means to pay the insurance premiums.  My wife lived well beyond the 6 months that the prognosis said that she would have lived without insurance and the care it purchased.  The disturbing fact is that millions of Americans do not have the access or financial means to pay for the same care.  That must change.

In our personal situations, the only financial relief my wife and I found after almost 4 years in this financially draining situation was that we both turned age 65 and became eligible for a well-run and affordable government option called Medicare.  Our joint monthly premiums including the Medicare premium, a private insurance supplement and the Medicare part D prescription plan was $500 per month compared to $1650 per month before turning 65 years of age. Our coverage included no deductibles or co-pays except for our prescription drugs.  Our-out-of pocket expense was limited mainly to prescription drug expenses.

Before anyone out there wants to just say NO and to deny that reform and more regulation of the medical health insurance industry is not necessary, you may want to ask if you or a family member could fall into any of the situations described above. If it is possible that you may need to purchase insurance in the future, you want to support insurance reform, more regulation of the insurance industry and more options now.

Howard Jackson

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