Tuesday, June 9, 2009

Many people who believe they have adequate health insurance actually have coverage so riddled with loopholes, limits, exclusions and gotchas that it won't come close to meeting their expenses if they fall seriously ill, a Consumer Reports investigation has found. At issue are so-called individual plans that consumers buy on their own when, say, they've been laid off from a job but are too young for Medicare or too affluent for Medicaid. An estimated 14,000 Americans a day lose their job-based coverage, and many might be considering individual insurance for the first time in their lives.

Individual insurance is increasingly a nightmare for consumers: more costly than the equivalent job-based coverage^ , and, for those in less-than-perfect health, unaffordable at best and unavailable at worst. Moreover, the lack of effective consumer protections in most states allows insurers to sell plans with "affordable" premiums whose skimpy coverage can leave people who get very sick with ^ the added burden of ruinous medical debt.

Here are seven signs that a health plan might be junk and you should do your best to avoid it:

Never buy a product that is labeled "limited benefit" or "not major medical" insurance. In most states those phrases might be your only clue to an inadequate policy.

Health care is more costly than you might imagine if you've never experienced a serious illness. The cost of cancer or a heart attack can easily hit six figures. Policies with coverage limits of $25,000 or even $100,000 are not adequate.

To lower premiums, insurers trim benefits and do what they can to avoid insuring less-healthy people. So if your insurance was a bargain, chances are good it doesn't cover very much. To check how much a comprehensive plan would cost you, go to www.ehealthinsurance.com, enter your location, sex and age as prompted, and look for the most costly of the plans that pop up. It is probably the most comprehensive.

If you don't see a medical service specifically mentioned in the policy, assume it's not covered. ^ We Consumer Reports reviewed policies that didn't cover prescription drugs or outpatient chemotherapy but didn't say so anywhere in the policy document ¿ not even in the section labeled "What is not covered."

A $900-a-day maximum benefit for hospital expenses will hardly make a dent in a $45,000 bill for heart bypass surgery. If you have to accept limits on some services, be sure your plan covers hospital and outpatient medical treatment, doctor visits, drugs, and diagnostic and imaging tests without a dollar limit. Limits on mental health costs, rehabilitation and durable medical equipment should be the most generous you can afford.

Avoid policies that fail to specify a maximum amount that you'll have to pay before the insurer will begin covering 100 percent of expenses. And be alert for loopholes. Some policies, for instance, don't count co-payments for doctor visits or prescription drugs toward the maximum. That can be a catastrophe for seriously ill people who rack up dozens of doctor's appointments and prescriptions a year.

Some policies begin covering hospital care on the second day. That seems benign enough, except that the first day is almost always the most expensive, because it usually includes charges for surgery and emergency room diagnostic tests and treatments.

The best way to protect yourself is to seek out comprehensive coverage. What you want is a plan that has no caps on specific coverages. ^ But if you have to choose, pick a plan offering unlimited coverage for hospital and outpatient treatment, doctor visits, drugs, and diagnostic and imaging tests. When it comes to lifetime coverage maximums, unlimited is best and $2 million should be the minimum.

Ideally, there should be a single deductible for everything or, at most, one deductible for drugs and one for everything else. And the policy should pay for 100 percent of all expenses once your out-of-pocket payments hit a certain amount, such as $5,000 or $10,000.

If you are healthy now, do not buy a plan based on the assumption that you will stay that way. You can't know in advance if you're going to be one of those people who needs a $20,000- a-month biologic drug.

If you have to make a trade-off to lower your premium, consider opting for a higher deductible and a higher out-of-pocket limit rather than fixed dollar limits on services. Better to use up part of your retirement savings paying $10,000 up front than to lose your whole nest egg paying a $90,000 medical bill after your policy's limits are exhausted.

For further guidance, go to ConsumerReportsHealth.org. More-detailed information -- including CR's ratings of prescription drugs, conditions, treatments, doctors, hospitals and healthy-living products -- is available to subscribers to that site.