Even with all the regulations governing the marketing and solicitation of health insurance, there are still folks who find a way to prey on vulnerable and desperate people. Hospital indemnity insurance is just one of the products that are fraudulently marketed as real health insurance. These indemnity plans are specifically targeting people with pre-existing conditions.
Recently, I had been working with a woman who had been denied a regular individual health insurance plan and was not yet eligible for California’s Pre-Existing Condition Insurance Plan. She knows the value and importance of health insurance and properly sought more information about health insurance plans that might cover her. When she was contacted by someone with health insurance that sounded too good to be true, she asked me if the plan was legitimate.
Here is a snippet of the marketing email she received:
As requested, here is the email you asked for. An initial review indicates you will get the most benefit from one of our guaranteed issue plans. The plan is through xyz company and is the only plan of it’s type which lets you choose the PPO network; either abc OR def, the largest networks in the U.S.
Plan Benefits Include:
· $75 benefit for Doctor Office Visits and Wellness Visits; no co-pay or deductible required
· Hospital Confinement, ICU/CCU and Surgery Benefits
· Diagnostic X-Ray and Lab
· Emergency Room
· A REAL Fully Insured Drug Card, NOT one of those “Discount Cards” with low $10 co-pay and NO monthly maximum on benefit!*
· And much more!
Additional Insurance Benefits:
· Critical Illness – $10,000
· Includes $10,000 Guaranteed Issue Term Life Insurance at no additional cost
· $15,000 Accidental Death and Dismemberment through Guarantee Trust Life Insurance Company.
The premium are extremely affordable. Your monthly premium will be $329.85 per month. Of course this is only a brief overview of the benefits, give me a call so I may answer any questions you may have.
All of these wonderful benefits could be hers for a low, one-time only, non-refundable $99.95 application fee.
It sounds like a duck
The vernacular used in the email really makes it sound like this a legitimate health insurance policy: guarantee issue, PPO network, Doctor office visits, co-pay, deductible, etc. But it is an indemnity plan that reimburses the member a set amount after the member has paid for the services and submits the paid invoice to the company.
Here are some of the differences between credible health insurance and these indemnity plans.
1. Association: Often times you must join an association to enroll in the plan. Part of the reason for the association membership is so they can include the life and critical illness insurance from a third party carrier. While the associations offer discounts on hotel, cars, shopping, etc., the primary purpose is to market you other products.
Credible health insurance plans do not make you join a group and never charge an enrollment fee.
2. Plan Benefits: The medical benefits are how much they reimburse you for services that you pay for such as doctor visits, hospital confinement, labs, etc. Many of these benefits have either a total or daily cap on them to limit how much they will reimburse you. One plan shows a $1500 per day benefit for hospital confinement with a maximum 31 day limit. If you have a 3 day hospital stay that totals $20,000, the $4,500 they reimburse you won’t go very far.
Credible health insurance does not cap covered benefits. Yes, you may have to accumulate coinsurance and deductibles, but once you reach your maximum out of pocket limit, the plan picks up 100% of the cost for the remainder of the year.
3. Additional Benefits: The additional critical illness and life insurance is really where these companies make their money. In California, even as noted in the summary of benefits I look at but not mentioned in the email, critical illness plans can’t be bundled with these indemnity plans. California doesn’t want people buying critical illness plans, (i.e.: heart attack, stroke, cancer) in lieu of credible health insurance.
Credible health insurance never bundles either critical illness or life insurance as part of the policy and premium. You can purchase term life insurance through your health insurance carrier, but it will be a separate charge.
4. Limitations and Exclusions: Read the fine print carefully. Many of these policies exclude reimbursements for medical care due to maternity, riding a motorcycle, birth control, preventive check ups and immunizations for children, treatment for allergies and many more.
Credible health insurance, in most states, is blind to how you received the nature of your injury, illness or the conduct of your life. With full implementation of the Affordable Care Act in 2014 health insurance in all states will be more comprehensive in benefits and available to people with pre-existing conditions.
5. What are you actually paying for? Of the $440.55 monthly premium for an individual, in the plan summary I reviewed, only $146.61 actually went to pay for the medical indemnity insurance. The remaining $293.94 went to the additional benefits such as term life and critical illness insurance. Just 33% of the premium is going toward the insurance for medical indemnification.
Credible health insurance must spend 80% of the premium dollars on medical care or improvements to care. If the carrier doesn’t meet the Medical Loss Ratio of 80% they have to send out rebate checks to the members.
Letter of the law
Hospital indemnity insurance plans are following the letter of the law with appropriate disclosures on the literature. Although, I did note that in the email sent there was no California Department of Insurance License number for the individual that sent the email. It is law that you always attach your CA DOI # to any correspondence when you market or solicit insurance in California.
Indemnity plans have their place when used to help cover the costs of deductibles and coinsurance associated with credible health insurance. However, honest indemnity plans don’t market themselves to people with pre-existing conditions as real health insurance. Honest indemnity plans don’t bundle life insurance in the product and are far less expensive than the plans I reviewed.
Health insurance sucks. My is hope that when the ACA is fully implemented in 2014 most of these over-priced indemnity plans that prey on people will go away.