April Capil has mixed feelings about the national outcry over canceled health insurance policies.
Five years free of the Stage III breast cancer that nearly claimed her life, the Boulder, Colo., resident is once again healthy, but she’s still struggling to put her life back together.
Like millions of Americans, Capil thought she had solid individual health insurance. Then she got sick and found that her coverage was woefully inadequate.
The financial problems that followed would aggravate Capil’s health struggles, force her into bankruptcy and trigger a fraud lawsuit over $230,000 in unpaid medical bills against HealthMarkets Inc., the parent company of her former insurer.
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The litigation is nothing new for HealthMarkets. The North Richland Hills-based insurer, formerly known as UICI, has a long history of battles with state regulators trying to root out “junk insurance” in the individual market.
But numerous sanctions and a host of consumer protections in the Affordable Care Act have put a financial squeeze on the company and forced it to change its business model.
Beginning in January, the law prohibits the kind of limitations, exclusions and benefit-spending caps that made Capil’s coverage so problematic.
But after falsely promising that Americans could keep their health insurance if they liked it, President Barack Obama bowed to political pressure in November and allowed a one-year extension of 2013 individual policies, even those facing cancellation because they don’t meet the law’s new minimum standards.
Now Capil, a software project manager, wonders how many Americans will use the president’s canceled-policy “fix” to unwittingly renew another year of “junk insurance” like what she had.
“It’s sad that there are people who have this insurance who don’t know that they’re going to end up like me if they ever get sick,” she said.
“I feel like people are upset that they’re losing these plans and they’re upset because they think their plans are comprehensive. But they aren’t. These insurance companies have been selling Americans coverage that will bankrupt them if they ever have a serious illness.”
Others share that concern.
“As those policies are grandfathered in, people have to be aware they may be exposed,” said Mark Rukavina, a healthcare consultant in Massachusetts and an expert on medical debt. “It’s something to think about as these people stay with these plans that seem like a good deal.”
Capil thought her plan was a good deal. She said her insurance agent told her that it was comprehensive coverage and that if she ever got cancer, she would never pay more than a deductible or co-insurance.
What she got instead was a “limited benefit plan,” which is “commonly seen as inadequate because it tends to pay for routine care and leave you without coverage fairly soon if something major costing tens of thousands of dollars kicks in,” said Ed Haislmaier, a senior research fellow for health policy at the Heritage Foundation, a conservative Washington think tank.
Donna Ledbetter, HealthMarkets’ director of external communications, declined an interview request for this report, citing Capil’s pending lawsuit. She also declined to answer questions not involving that litigation.
The company employed 556 people in its offices at 9151 Grapevine Highway, according to a North Richland Hills list of its largest employers. That’s down from more than 1,000 in 2010.
Capil’s experience is cautionary. Most people don’t realize that their policies have limitations until they actually need the coverage.
Of the 16 million Americans with individual coverage, only 725,000 had limited-benefit policies in 2012, Haislmaier said, citing industry data. Of those, he said, roughly 132,000 were enrolled in HealthMarkets limited-benefit plans, sometimes called “scheduled benefit” plans.
“They do cover a wide range of things,” Haislmaier said, “but with very low benefit levels. So they wouldn’t turn you away saying, ‘You have a heart condition. We only cover cancer.’ They turn you away saying, ‘You exceeded your $50,000’ ” coverage limit.
If you exclude fly-by-night insurers that set up bank accounts, collect premiums and skip with the cash, HealthMarkets and its subsidiary companies hold a rare distinction, said Capil’s attorney, Antony Stuart of Los Angeles.
“They’re the worst health insurance company that is actually trying to operate within the law,” Stuart said. “I can’t imagine that there has ever been any worse.”
Along with improperly denying benefits, HealthMarkets and its agents are accused of deceptive marketing by misrepresenting the terms of their policies and obscuring the coverage limitations in confusing contract language.
The complaints are a familiar refrain for HealthMarkets, which is owned by three prominent Wall Street private equity firms: Goldman Sachs Capital Partners, the Blackstone Group and Credit Suisse-DLJ Merchant Banking Partners.
Consumer lawsuits and state insurance regulators nationwide have targeted the company for years over its market conduct and sales and marketing practices.
In 2008, HealthMarkets and its subsidiaries agreed to pay $20 million to 28 states over numerous violations that state insurance regulators uncovered in a three-year, multistate examination.
Spurred by numerous consumer complaints and individual state investigations, the examination found problems with HealthMarkets’ handling of claims, its cancellation policies, its training and oversight of agents and its policy disclosures for consumers.
In a news release from July 2012, HealthMarkets President and CEO Kenneth Fasola said the company is “vastly different” from when the multistate examination began in 2005. Fasola said the company used the settlement agreement with the states as a “blueprint for transforming our organization.”
As part of that transformation, HealthMarkets stopped selling “scheduled benefit” plans in 2010 and stopped marketing all individually underwritten plans “in all but a limited number of states,” according to recent filings with the Securities and Exchange Commission.
The moves have put a financial squeeze on the company, causing agent commissions, underwriting profits and premium revenue to decline. HealthMarkets’ premium revenue has fallen from $737 million in 2010 to $459 million in 2012.
Provisions of the Affordable Care Act have also affected the company’s bottom line, including the elimination of benefit caps for individual policies and a 2011 rule that requires insurers to spend at least 80 percent of premium payments on medical care or plan improvements.
Companies that don’t meet that threshold have to pay rebates to consumers. The rule has forced HealthMarkets to pay $25.5 million in rebates thus far, federal filings show.
The multistate inquiry into HealthMarkets found problems with its financial ties to membership associations that marketed their products, which is how Capil obtained her policy.
About 3.2 million people get individual coverage through professional associations, said Haislmaier, of the Heritage Foundation. Capil bought hers through the National Association for the Self-Employed, which her lawsuit alleges was little more than a marketing vehicle for HealthMarkets policies.