After Tony Camilleri took his pregnant wife, Bridget, to an emergency room, they were surprised to find their insurance left them owing bills of more than $8,000. Their baby is due in September.
Tony Camilleri rushed his pregnant wife, Bridget, to an emergency room in January, fearing she was suffering a dangerous complication with her pregnancy. Luckily, tests showed she was not.
Then the Michigan couple began getting bills from doctors and the hospital, for more than $8,000. To his surprise, Camilleri's insurance didn't cover any of it because his wife had surpassed a $2,500-a-person annual limit on what the policy would pay.
CHART: Companies with limited medical benefit plans
Eric Chaves, a security officer in Massachusetts, owes more than 1½ months of take-home wages for medical care this year. Two trips to the emergency room — one in an ambulance — exceeded his plan's annual $4,000 cap for doctor care, tests and ER visits.
Both men are enrolled in an increasingly popular — and controversial — type of health insurance that gives limited coverage to more than 1 million Americans. Their cases reflect a building debate about whether such policies provide a false sense of security, and raise the question: Is a little coverage that much better than none at all?
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Often called "limited medical benefit plans," the policies can cost far less than traditional insurance. But they cap what insurers will pay toward medical care, with the skimpiest plans covering as little as $1,000 a year. Some have daily caps, such as paying a few hundred dollars a day toward hospital coverage. Traditional insurance, by contrast, generally covers most medical expenses in a given year, after deductibles and co-payments.
Insurers say limited-benefit policies — once mainly sold to the self-employed or others who buy their own insurance — are gaining interest among employers with low-wage, part-time or contract workers. National companies such as McDonald's, the Hair Cuttery salons and Friendly's restaurants offer such coverage to their workers, as do many smaller businesses.
Proponents say the limited plans should not be considered the solution to the problem of the uninsured, but rather one option to help people get basic medical care. Some patient advocates disagree, saying many of the plans leave policyholders more vulnerable to devastating medical bills than they might think.
Under limited-benefit plans, "people think they have insurance, get sick and find out that they don't," says Beverley Brakeman of Citizens for Economic Opportunity, an advocacy group in Connecticut.
Despite such criticism, the plans' huge sales potential among employers has attracted mainstream insurers such as Aetna, Cigna and Blue Cross Blue Shield, as well as several smaller insurers. UnitedHealth offers such policies to university students, and HealthMarkets sells them to self-employed people through its MegaLife and Mid-West Life companies.
Although still a tiny part of the insured market — about 1 million policies among the nearly 160 million workers who get their insurance from employers — limited-benefit plans are seen by insurers as a bright spot for growth in an otherwise stagnant market.
Insurers are targeting the estimated 39% of employers who currently don't offer health insurance. "The market has a potential 14% to 16% annual growth rate," says Eric Motter, vice president of marketing for Cigna's emerging markets segment. Cigna began offering limited plans last year after purchasing Star HRG from HealthMarkets.
The growth in limited-benefit plans has drawn attention from wary state regulators:
•Connecticut Attorney General Richard Blumenthal testified before his state's Insurance and Real Estate Committee in February that such plans generally should be prohibited. Most states, including Connecticut, allow them.
"Their benefits are illusory, offering consumers insurance that fails to cover most hospital visits or even basic health care services," Blumenthal testified.
•Massachusetts' attorney general filed suit last year against HealthMarkets, saying its policies failed to cover services required by the state, including contraceptives.
•Washington state temporarily barred limited-medical plans last year, but lawmakers approved legislation in April to allow them, even though they don't include state-required mandates such as covering drug-dependency treatment.
"Some folks felt it was a very dangerous precedent to set, but I think our legislators are really trying to come up with a variety of (insurance) alternatives," says Beth Berendt, the state's deputy insurance commissioner. "I have mixed feelings. If I were a single mom earning minimum wage, and I knew that for $15 to $20 a month I could take my kid to the doctor for an ear infection, that's worth it." Driven to change jobs
Camilleri and Chaves say they soured on limited-benefit plans.
"It wasn't worth it," says Camilleri, who got his insurance through the staffing agency that placed him in his job as a test engineer. The insurance cost Camilleri $400 a month and covered himself, his wife, Bridget, 33, and stepdaughter, Stephanie, 11.
The policies are offered to the 55,000 contractors who work for staffing agency Aerotek, says spokeswoman Sherri Kraus. The policies, she says, "are highly competitive, especially within the staffing industry."
Camilleri had a choice of three plans: One covered up to $5,000 of care a year for each family member; the second, $15,000; and the third, $150,000. He chose the $15,000 plan. The most comprehensive plan would have cost him $800 a month, or about 16% of his $60,000 salary. The average cost of medical care for a family of four in 2007 enrolled in a major medical plan reached $14,500 this year, including premiums, according to a study released last month by the actuarial firm Milliman. Workers paid an average of $5,591 toward that cost, through premium contributions and out-of-pocket expenses.
Camilleri's plan capped each person at $2,500 in outpatient care, including ER visits, a restriction he says was not clear in the information given to employees. Aerotek's Kraus says the firm provides many ways for employees to learn the details of their health insurance, including written materials, a toll-free phone line and a local office.
Months after his wife's ER visit, Camilleri says he is still trying to negotiate with the hospital, labs and doctors who have sent him bills, trying to reduce the amounts and set up payment plans.
"I am making daily phone calls," says Camilleri, 32. He has changed jobs and now has more traditional insurance that doesn't have low annual caps on coverage.
Chaves, 26, says he pays about $22 a week for his limited-benefit plan, which provides up to $4,000 annually in outpatient care, $1,200 annually for medicine and $400 a day toward hospital care up to $8,000. Nationally, the average cost for hospital care is about $3,000 a day, according to Milliman.
His coverage might be enough if he had no health problems, but Chaves suffers from seizures and has made several trips to the hospital and his doctor's office. By April, he had used up his benefit for the year, so he's paying full cost for his seizure medications and owes about $2,000 for hospital visits.
"I never knew health plans could do that," says Chaves, who says he brings home about $315 a week. "My old health plan when I had Blue Cross didn't do that. They covered the whole thing in full. I never got a bill from a doctor before."