Health Insurance Options That Squeeze Individuals

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Christy Annett, a leukemia survivor, had her insurance policy canceled and now faces $50,000 in medical bills.

More offerings. Insurers are making some effort to expand the market for individual policies, taking particular aim at young, healthy people and early retirees who aren't yet eligible for Medicare. Some plans offer stripped-down benefits: The Tonik "Thrill Seeker" plan from WellPoint, for example, covers just four doctor visits a year and has a $5,000 deductible. At the other end of the spectrum, Humana's Portrait plan provides unlimited visits to non-specialists for a $35 copayment, and the deductible for other services can be as low as $1,000. "It's more like what early retirees might be used to having under their regular group plan," says Steve DeRaleau, chief operating officer of Humana's individual products market.

Putting lipstick on a pig doesn't make it any less smelly, consumer advocates say. One practice that stinks, they argue, is insurers retroactively canceling an individual policy because the member failed to accurately report his or her medical history on the application. The industry is currently on the hot seat in California, where, in December, a state appeals court ruled that insurers can't cancel members' insurance over an inaccurate medical history unless a member has actually lied; the misrepresentation must be willful, not just a mistake. The court also found that insurers have to make an effort to research an applicant's health history upfront, before issuing a policy. In other words, they can't wait until someone racks up hefty bills and then decide to examine the application for errors that could justify canceling the policy. Noting that the closely watched case may open the door for other lawsuits nationwide, Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego, says, "This is the insurers' worst nightmare."

If the courts had taken this stance earlier, it might have helped Christy Annett, whose insurer canceled her policy last year. Annett, 29, was diagnosed with acute myelogenous leukemia in 1995. When she sought insurance in 2006, the application asked whether she'd been diagnosed, treated, or followed up for cancer in the previous 10 years. She says she explained her situation to the insurer's customer service representative, including the fact that she'd been in remission for 11 years but continued to have blood work done every three months to make sure the cancer hadn't returned. No problem, she says the representative told her. That's considered preventive care, not treatment. (Annett declined to publicly name her insurer on the advice of her attorney.)

But last winter, when Annett developed another blood disorder and made a claim for a $4,000 shot to boost her red blood cell count, her insurer refused to pay. In June 2007, the company canceled her policy, claiming she misrepresented herself on her application. The quarterly blood draws were cancer treatment, she says the company told her. After losing two appeals, Annett, who lives in Las Vegas, has no insurance and an estimated $50,000 in medical bills. The Patient Advocate Foundation, an assistance and advocacy group, found a cancer center that agreed to give Annett a necessary bone marrow transplant free of charge. "There's so much money to be made by canceling people," she says of her experience. "I'm just a number to them." There's no way to guarantee a win in a numbers game, but you can improve your odds. If you're considering buying a policy on your own, read it carefully and make sure you understand what it does and doesn't cover (see "How to Pick an Insurance Plan You Can Afford"). And when you fill out an application, be open and honest and indicate that you're happy to provide any additional information. "Then," says Liang, "you're on solid legal ground."