Five years free of the stage III breast cancer that nearly claimed her life, the Boulder, Colo., resident is once again healthy, but she’s still struggling to put her life back together.
Like millions of Americans, Capil thought she had solid individual health insurance. Then she got sick and found that her coverage was woefully inadequate.
The financial problems that followed would aggravate Capil’s health struggles, force her into bankruptcy and trigger a fraud lawsuit over $230,000 in unpaid medical bills against HealthMarkets Inc., the parent company of her former insurer.
The litigation is nothing new for HealthMarkets. The North Richland Hills, Texas, insurer, formerly known as UICI, has a long history of battles with state regulators trying to root out “junk insurance” in the individual market. But numerous sanctions and a host of consumer protections in the Affordable Care Act have put a financial squeeze on the company and forced it to change its business model.
Beginning in January 2014, the health care law prohibits the kind of limitations, exclusions and benefit spending caps that made Capil’s coverage so problematic.
But after falsely promising that Americans could keep their health insurance if they liked it, President Barack Obama bowed to political pressure in November and OK’d a one-year extension on 2013 individual policies — even those facing cancellation next year because they don’t meet the health law’s new minimum standards.
Now Capil, a software project manager, wonders how many Americans will use the president’s canceled-policy “fix” to unwittingly renew another year of “junk insurance” like she used to have.
“It’s sad that there are people who have this insurance who don’t know that they’re going to end up like me if they ever get sick,” she said. “I feel like people are upset that they’re losing these plans and they’re upset because they think their plans are comprehensive. But they aren’t. These insurance companies have been selling Americans coverage that will bankrupt them if they ever have a serious illness.”
It’s a concern others share as well.
“As those policies are grandfathered in, people have to be aware they may be exposed,” said Mark Rukavina, a health care consultant in Massachusetts and an expert on medical debt. “It’s something to think about as these people stay with these plans that seem like a good deal.”
Capil thought her plan was a good deal. She said her insurance agent told her it was full, comprehensive coverage and if she ever got cancer, Capil would never pay more than a deductible or co-insurance.
What she got instead was a “limited benefit plan,” which is “commonly seen as inadequate because it tends to pay for routine care and leave you without coverage fairly soon if something major costing tens of thousands of dollars kicks in,” said Ed Haislmaier, a senior research fellow for health policy at the Heritage Foundation, a conservative Washington think tank.
Donna Ledbetter, HealthMarkets’ director of external communications, declined an interview request for this story, citing Capil’s pending lawsuit. She also declined to answer questions not involving that litigation.
Capil’s experience is cautionary. Most people don’t realize their policies have coverage limitations until they actually need the coverage.
Of the 16 million Americans with individual coverage, only 725,000 people had limited benefit policies in 2012, Haislmaier said, citing industry data. Of these, he said roughly 132,000 were enrolled in HealthMarkets limited benefit plans, which are sometimes called “scheduled benefit” plans.
“They do cover a wide range of things,” Haislmaier said, “but with very low benefit levels. So they wouldn’t turn you away saying, ‘You have a heart condition. We only cover cancer.’ They turn you away saying, ‘You exceeded your $50,000’ ” coverage limit.
If you exclude the fly-by-night insurers that set up bank accounts, collect premiums and skip with the cash, HealthMarkets and its subsidiary insurance companies hold a rare distinction, said Capil’s attorney, Antony Stuart of Los Angeles.
“They’re the worst health insurance company that is actually trying to operate within the law,” Stuart said. “I can’t imagine that there has ever been any worse.”
The complaints are a familiar refrain for HealthMarkets, which is owned by three prominent Wall Street private equity firms: Goldman Sachs Capital Partners, The Blackstone Group and Credit-Suisse-DLJ Merchant Banking Partners.
Consumer lawsuits and state insurance regulators across the country have targeted the company for years over its market conduct and sales and marketing practices.
In 2008, HealthMarkets and its subsidiary insurance companies agreed to pay $20 million to 28 states over numerous violations that state insurance regulators uncovered in a three-year, multi-state examination of the company.
Spurred by numerous consumer complaints and individual state investigations, the examination found problems with HealthMarkets’ handling of claims, their cancellation policies, their training and oversight of agents and their policy disclosures for consumers.
In 2009, the Massachusetts attorney general fined the company $17 million for unfair and deceptive marketing practices and barred HealthMarkets from selling policies in the state for five years.
Last year, state insurance regulators slapped the company with a $325,000 penalty for not meeting five of 95 performance measures that were part of the $20 million 2008 settlement agreement. The unmet measures dealt with training and oversight of agents.
In a press release from July 2012, HealthMarkets’ president and CEO, Kenneth J. Fasola, said the company is “vastly different” than it was when the multi-state examination began in 2005. Fasola said the company used the settlement agreement with the states as a “blueprint for transforming our organization.”
Both Adams and Capil claim their agents misled them about their HealthMarkets coverage. Although healthy when he bought his policy in 2004, Adams said he told his agent he wanted comprehensive catastrophic coverage for major medical crises. He said the agent assured him that his “California Covered America Plan” from Mid-West was just that.
Adams thought the policy provided $1 million in coverage because a plan brochure described it as “$1,000,000 basic hospital medical-surgical insurance coverage.”
That’s not surprising, said Wendell Potter, a senior health care analyst at the Center for Public Integrity, a research and investigative news organization. Potter is also a former insurance industry executive who left the business in 2008 because of concerns over junk insurance and other industry practices.
“If you look at the marketing materials for these kinds of plans, they’re pretty slick and attractive and people don’t realize, I think, in many cases what they’re buying offers inadequate coverage because it’s not in the bold print,” Potter said. “It’s often in the fine print. And it’s certainly not in the promotional material in any way that’s conspicuous, so a lot of people are just not aware.”