Watch Out for Short Term Health Insurance Policies and Pre-Existing Illness Conditions

Time healthcare correspondent Karen Tumulty last month provided an eye-opening account of one man’s journey through the healthcare system by chronicling her brother Patrick’s three-year struggle to receive the level of treatment he needs to fight kidney disease. “The Health Care Crisis Hits Home.”

As the article unfolds, almost everyone involved in Patrick’s care – his family, his doctor, his treatment center, his medical creditors, and his county health care program – showed compassion and a willingness to offer solutions for his care. Everyone, that is, except his insurance company.

Tumulty’s brother, who also suffers from Asperger’s syndrome, a high-functioning form of autism, was relying on a series of short-term individual medical insurance policies he purchased as a temporary worker while seeking full-time employment with employer-provided health insurance. He paid premiums on the policies issued by Assurant Health for six years. It wasn’t until he got sick and was denied coverage that his family understood how “underinsured” he was.

Patrick had been continuously covered by Assurant since 2002, but as he transferred into successive short-term policies, the company treated him as a new customer each time. As a result, because Patrick underwent tests for possible illnesses while one policy was in force but was not diagnosed with his disease until after a new policy was issued, the company considered his illness a pre-existing condition and denied coverage.

Karen Pollitz, project director of Georgetown University’s Health Policy Institute and a leading expert on the individual-insurance market told Tumulty, “These short-term policies are a joke. Nobody should ever buy them. It is false security that is being sold. It’s junk.”

Tumulty’s experience with her brother has caused her to question the Obama Administration’s plan to allow people to opt out of the employer-provided insurance market to purchase their own individual coverage. The premise behind that initiative is that the consumer is the better able to determine which policy suits his or her own needs.

“Pat’s experience suggests it is difficult for an individual to make such judgments,” writes Tumulty. “And the existing market for these kinds of policies leaves a lot to be desired. A 2006 Commonwealth Fund study found that only 1 in 10 people who shopped for insurance in the individual market ended up buying a policy. Most of the others couldn’t find the coverage they needed at a price they could afford.”

Tumulty and Patrick ended up filing a complaint against Assurant with the Texas Department of Insurance. Less than a month later, the company – although it admitted no wrongdoing and even had the audacity to blame Patrick for purchasing inappropriate insurance – agreed to pay some of Patrick’s claims.

And guess what else Tumulty uncovered as she investigated Assurant and its claims-handling practice? Last year, Connecticut insurance regulators fined Assurant $2.1 million for alleged “postclaims underwriting,” that is, belatedly reviewing short-term policyholder’s medical records to uncover pretexts to deny claims or rescind policies. Assurant paid the fine, but admitted no wrongdoing.

Tumulty discovered what we’ve been saying on the blog for quite a while. Healthcare reform is a necessity, but it should begin where the majority of the problems lie: with an industry quick to collect your money for whatever fly-by-night products they create and market as long as you are well, but increasingly loath to fulfill their part of the agreement once you get sick.

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