Bare-Bones Health Insurance Criticized

Insurance companies are responding to the call for affordable health coverage by offering bare-bones policies tantamount to “health insurance that doesn’t insure,” an advocacy group said Sunday.

The Families USA Foundation criticized insurers for mounting a nationwide campaign to win the right to market new, less expensive policies it said provide extremely limited protection.

“They are descending upon state legislatures, seeking the right to market health insurance that is barely worth the paper it’s written on,” said Ron Pollack, executive director of the nonprofit foundation.

For example, he said, under the stripped-down policy allowed in Kansas, a worker pays for the first $5,000 in health-care bills plus monthly premiums.

“Paying a $5,000 deductible before the insurance takes effect means just one thing: Workers cannot afford to get the health care they need,” Pollack said.

In Kentucky, he said, the stripped-down package covers just 14 hospital days, half of physician fees in the hospital and no outpatient coverage while imposing a $300 deductible and a 20% co-payment for hospital days.

Richard Coorsh, a spokesman for the Health Insurance Assn. of America, said the stripped-down policies are a good option for small businesses that otherwise would not be able to find coverage.

He said that large, self-insured companies are allowed to offer bare-bones protection to their workers and that small businesses should be able to buy similar coverage.

State-mandated benefits, he said, can drive up premiums by 20%, pricing small businesses out of the market.

“We feel it’s worthwhile to have some coverage for people who need health-care coverage as opposed to no coverage,” Coorsh said, adding that it’s easier to expand benefits once small businesses offer basic coverage.

Insurance companies say state laws requiring them to offer certain types of benefits have been a barrier to providing affordable health insurance, particularly for small businesses.

Responding to such complaints, 17 states have passed laws during the past 18 months allowing companies to offer stripped-down policies, Families USA said. Other states are considering similar action, it said in a report titled “Bare-Bones Coverage: Health Insurance That Doesn’t Insure.”

The policies may eliminate certain types of benefits, such as alcoholism treatment; certain types of individuals, such as newborn and adopted children, and care by certain kinds of providers, such as nurse midwives.

But the report said the primary reason the policies cost less is that they carry heavier cost-sharing requirements for individuals.