Millions of people are paying more than twice as much for cancer insurance as they would for regular group insurance, according to a report presented yesterday to the federal government.
The report says that a cancer victim with a cancer insurance policy receives 29 percent or less of the medical cost of treating that cancer. Under a group comprehensive policy, the same person would receive 74 to 90 percent of the cost of treating the illness, the report says.
"The fact that cancer insurance turns out to have so little value confirms that consumers are being deceived if they believe it will adequately cover the cost of their treatment," Rep. Claude Pepper (D-Fla.) chairman of the House Committee on Aging, said yesterday of the report's findings.
The committee issued a study in March charging that much of the cancer insurance sold in the United States was overpriced because policyholders typically received less than 40 cents in benefits for every dollar in premiums paid.
The committee has estimated that 20 million cancer policies are in force nationally, but that figure is disputed by insurance companies.
The American Family Life Assurance Co. of Columbus, Ga., the largest of its kind, estimates that there are 4 million cancer insurance policies in the United States.
The report was prepared by Abt Associates Inc. of Cambridge, Mass., for the National Credit Union Administration. Complaints about credit union promotions of cancer insurance, along with publicity about the specialized insurance, had promised the federal agency to order the study.
The report's principal findings included:
The average payout by a cancer insurance policy over a three-year period was about $3,700, whereas the average benefits from the group policy were about $9,100.
Promotional material used by cancer insurance companies doesn't adequately explain the likelihood of getting cancer or the benefits provided by the policies. The premiums are accurately explained in the material, however.
The report was based on 45 case histories over a three-year period, Abt researchers said.
Cancer insurance company officials challenged the report, saying that the comparisons are not valid.
Lee Parker, a spokesman for American Family Life Assurance Co., said a cancer insurance policy is a renewable annual policy issued to an individual while a group policy is for a number of people and can be cancelled by the company. The two policies are as "different as apples and oranges," he said.
Parker agreed with the study's finding that the cancer policy pays up to 30 percent of the medical costs for the patient during the period of time studied, 1976-78.
"I would say that is reasonably accurate," he said. But improved benefits since 1978 and payouts over the life of the policy result in payouts of as much as 64 percent for his company, he said.
"I can prove that our loss ratios and benefits are in line and even a little bit better than (the average) group policies," Parker said.
The cancer insurance controversy has been mounting in recent months.
Ralph Nader called cancer policies "one of the biggest frauds in the insurance industry." The Federal Trade Commission likened "dread disease" insurance -- of which cancer insurance is one kind -- to "buying a lottery ticket." The American Cancer Society officially opposes cancer insurance.
Lawsuits by the American Family Life Associations are pending against both "Changing Times," a consumer magazine, and ABC-TV News for presentations on cancer insurance. The suits allege libel and slander. The association has an estimated 60 percent of the cancer insurance market.
Parker, a company spokesman, said there has been some abuse by cancer insurance policy salesmen but not by his company. "We are innocent," he said.
Parker said his company surveyed policyholders to find out if salesmen had "preyed on people's fear of cancer" in their sales pitch. "Three per cent said yes -- that is barely statistically significant," he said.
After accepting the Abt cancer insurance report yesterday, the National Credit Union Association asked its staff of policy analysts to recommend steps that the agency should take on the issue.
An estimated 3,500 credit unions have sent members cancer insurance solicitations containing credit union league endorsements. Members who opt for the policies can have the premiums deducted from their paychecks and sent to the insurance company.
In the Washington area, about 14 out of 133 credit unions have participated in the solicitation program, officials said.
The agency's action in ordering a study of cancer insurance benefits was applauded by Rep. Henry Reuss (D-Wis.), chairman of the House Committee on Banking, Finance and Urban Affairs. The Reuss committee created credit union agency and reviews its activities.
"The NCUA, in addressing the issue of cancer insurance; has demonstrated its willingness to take on a controversial issue; which, it not carefully monitored, could have tarnished the very good consumer perception of federally chartered or federally insured credit unions," Reuss said.
He also said that the study "certainly demonstrates that any purchaser of cancer insurance should carefully consider the fine print of that policy.