Junk Health Insurance

I'm one of those lucky Americans who never had to shop for health insurance. I've always gotten it through my employer or Medicare. So it was a real eye-opener for me when I read about what passes for “health insurance” in the latest issue of Consumer Reports.

Junk health insurance comes in three varieties. Only the first of these qualifies as actual insurance; the other two are not insurance, but are marketed as if they were.

• Mini-med plans. This is real insurance, offered by recognizable health insurance brands, e.g., Aetna, Cigna, but at a lower price than their other insurance plans. Their distinguishing feature is extremely low yearly coverage limits, often only a couple of thousand dollars per year, which is useless if you have a serious illness.
  
  
• Fixed benefit indemnity plans. These plans reimburse you a fixed and generally low amount for medical care, i.e., $100 for each of five doctor visits per year.
  
  
• Medical discount cards. These plans offer a percentage discount on medical services in exchange for a monthly fee, if you can find a provider who will honor the card.

The latter two types of plans are sold by fly-by-night companies with generic names and are marketed directly to consumers over the phone and the internet. Premiums are generally high, and if consumers read the fine print they will realize that the potential reimbursement is not much greater than the yearly fee. Needless to say, the advertising and sales pitches are intended to obscure this fact.

Mini-meds are usually sold to low-wage employees of businesses such as retail or junk food who want to claim they offer some health insurance to their employees. The employer may or may not contribute to the premium. The Affordable Care Act (ACA) prohibits the sale of health insurance that has yearly or lifetime caps on benefits, so these plans were supposed to go out of existence at the end of 2010. However, employers such as McDonald's threatened to completely drop insurance coverage for their employees if the law was implemented. The Obama administration, consistent with its typical pattern of behavior, caved in to the pressure and granted waivers to 1231 mini-med plans covering almost 4 million people until 2014. It's not clear what will happen then.

The fixed benefit plans and discount cards also face a 2014 deadline, since citizens are required to have health insurance by that time and these plans are not health insurance. Of course, this presumes that the ACA still exists in 2014. These plans could be saved by either an Elephant landslide in the 2012 election or a ruling by the Supremes that the ACA is unconstitutional.

The article is filled with horror stories of people with life-threatening illnesses whose coverage fell far short of their expectations. The continued existence of these plans is one of many symptoms of a business culture that tries to cheat people out of their money whenever it can, and a government regulatory structure that does almost nothing to protect consumers from this type of exploitation.