Better than nothing?

Sunday, July 15, 2007


WATERLOO, Jul. 15, 2007 (McClatchy-Tribune Regional News delivered by Newstex) --
When something continues to rise in price, it is natural to look for an alternative.

When gas prices sky-rocketed, sales of fuel-efficient cars rose with them. Health care is no different.

In 2005, the last year such data was collected, Health Affairs, a print and online health-care journal, found that Americans spent nearly $2 trillion on health care, or about $6,700 per person. That is a 6.9 percent increase since 2004 -- twice the rate of inflation.

Likewise, the 2006 Henry J. Kaiser Family Foundation's Employee Health Benefits Survey found premiums increased by 7.7 percent from 2005. It also found the average annual premium for an employer health plan covering a family of four to cost around $11,500.

To fight rising costs, more than 1 million Americans have signed up for what is commonly known as a limited medical benefit plan, more affordable because of the caps it places on coverage.

Companies have begun to offer several different health-care packages to give employees more options, and limited-benefit plans have been a popular choice the last few years.

These plans often cost far less than traditional insurance. However, the plans cap what insurers contribute toward medical expenses, with some offering as little as $1,000 annually.

While traditional insurance covers most medical expenses after deductibles and co-payments, some limited-benefit plans have daily caps -- offering a couple of hundred dollars per day toward hospital care.

Once sold mainly to the self-employed, limited-benefit policies are now offered by national companies like McDonald's, Regis Corp. (NYSE:RGS) and Wal-Mart. (NYSE:WMT) They have became an option for young adults just starting in the work force, and now there is no target demographic.

Designed as an affordable solution to being uninsured, any serious injury or illness will likely leave the policy-holder responsible for hefty bills.

Tom Alger, communications director for the Iowa Insurance Division in Des Moines, has dealt with people who carry such plans and were surprised when they weren't covered for a hospital visit.

'We do get some complaints on them,' said Alger, 'and those complaints are typically from people who didn't understand the limitations.'

Despite its drawbacks, large insurers such as Aetna (NYSE:AEF) (NYSE:AET) , Cigna (NYSE:CI) and Wellmark Blue Cross Blue Shield now offer such plans, though the Iowa and South Dakota branch of Wellmark doesn't.

In fact, it is difficult to find companies in the Cedar Valley that offer the policies, though Alger says the plans are as common in Iowa as anywhere else.

What's the problem?

Nearly 160 million Americans have traditional insurance, dwarfing the 1 million with limited-benefit plans.

Yet for some, limited-benefit plans are the only alternative to no insurance at all.

Between July 7 and 12, 2005, the Department of Public Health surveyed 1,202 Iowa residents between the ages of 18 and 64 about their attitudes toward health insurance.

The survey found 86 percent said they contributed less to savings because of health-care costs, while 44 percent said they had to cut back on food and heating expenses. A recent study out of Harvard University found someone in the United States files for bankruptcy every 30 seconds after being unable to afford their medical bills.

Traditional insurance plans use deductibles and co-payments to contain costs and give policy-holders an idea of what out-of-pocket expenses to expect. But rising health-care costs have made such plans unaffordable for millions of Americans.

In that environment, the number of consumers choosing limited-benefit policies is rising.

But critics say they often don't understand what is covered.

An average limited-benefit plan costs anywhere from $15 to $25 a month. However, it comes with a low cap on benefits, ranging from $1,000 to $4,000 annually. While that will cover a visit to the doctor for a child's ear infection or your bout with the flu, it won't cover serious outpatient care or a trip to the ER.

The gaping holes in coverage have moved states like Massachusetts and Washington to try to bar limited-benefit plans for not including state-mandated services.

'It could be argued that it's better than nothing,' Alger said, 'but we encourage all consumers to understand what exactly they're buying.'

Alger urges customers considering limited-benefit policies to read them through several times and make sure they know what the coverage entails. Complaints his office receives usually involve people who don't understand the limitations of their policies.

'It gives people a false sense of security in thinking that they have an insurance plan that covers them for most things,' Alger added. 'The catastrophic cost can be so high, and the coverage can be so low.'

Contact Taylor Bern at (319) 291-1424 or  taylor.bern@wcfcourier.com.

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