Bob Herbert has a column in today's New York Times that highlights the sad intersection of catastrophic illness and a health insurance policy with low coverage limits. Sandra Hightower's 15 year old daughter developed cancer. She needed extensive treatment. Fortunately for Sandra, she had health insurance. Unfortunately, the policy had an annual limit of $75,000 for benefits. Brittney's treatment was expensive, over $300,000. Sandra scrambled to raise the money she needed above and beyond the policy limits. Eventually Brittney ended up qualifying for Medicaid and her expenses after that point were covered. But Sandra was left with thousands in medical expenses for which she was responsible. Not to mention the worry that she hadn't provided all the financial backing to treat her daughter's cancer that she could have. The story is tragic but Herbert doesn't specify a solution. One would be to require the insurer to provide a higher level of benefits regardless of the policy language. But this type of nanny state protectionism is obnoxious. Obviously, not all policies are the same. I've seen (am litigating right now) policies that I contend do not fairly disclose limits or exclusions that insurers later try to unfairly apply. In that situation, a good argument exists to say that the insurer shouldn't be able to enforce the limitation or exclusion. Herbert's story doesn't tell us whether Sandra's policy fairly and explicitly disclosed the low annual limit. But if it did, why shouldn't insurers and consumers be free to purchase that product and expect that courts will enforce it according to its unambiguous terms? Sandra's policy wasn't a very good one from my perspective. It leaves the insured exposed to a lot of medical expenses. After all, it doesn't take too serious an injury or illness to ring up $75,000 of medical expenses in a year. But it probably had much less expensive premiums than one providing significantly higher limits. In the judgment of a reasonable insurer and insured, a relatively low cost/low coverage limit policy may be just the ticket. I don't presume to dictate that others can't enter into that type of insurance arrangement. And I think the availability of a range of insurance options is a good thing. Another solution is to mandate that all individuals have insurance coverage at a certain minimum level, reasonably calculated to ensure that individuals will have adequate coverage for catastrophic injuries or illness. While less objectionable than ignoring the terms of a deal individuals choose to enter into, it still puts in place a significant government mandate that places a significant financial burden on individuals. Finally, we can agree that health benefits at a certain minimum level will be provided to all citizens as a right or entitlement. Of course, the cost of that benefit will be distributed on the members of our society, the specifics of which depend on the predelictions of elected officials who enact such a program. The discussion in political circles today focuses on the last two alternatives, perhaps an amalgam of the two. But it seems to me a signficant thing that so few voices exist defending the status quo. Is it self-evident that we will see substantial change in how medical care is delivered and paid for the next few years?
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Don Levit 11/17/2008 01:47 PM
Brian: This indeed is an unfortunate situation, in which the coverage was, simply, not enough. The mother in this case was unaware of the annual limits. If they were clearly described, the insured would seem to have no legal justification for pursuing the "underpayment." I think your reasoning is very valid, in that people should have the option of choosing this type of policy. At least in this situation, the insurer did not seem to promise more than it would realistically deliver. There are contracts out there with no annual limits. You can be pretty sure those are the contracts which promise more than they can deliver. I would think that if this family was a typical one, a $75,000 medical expense would be a catastrophe. It's not that she didn't have catastrophic coverage for her family. In fact, I believe she could have had a very efficiently priced policy with those annual limits. It wouldn't have cost much more to have a secondary plan, whose benefits started at a $75,000 deductible. Don Levit
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Brian S. King 11/17/2008 01:47 PM
Absolutely. You would think that a secondary policy with a deductible of $75,000 per year would not be very expensive. In reality, not many folks have the background and knowledge to recognize the need for such a supplemental policy.
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