States scrutinize health insurer offering limited-benefit policies

HealthMarkets and its subsidiaries face a lawsuit and a multistate investigation.

By Dave Hansen, AMNews staff. Oct. 1, 2007.

Washington -- Thirty-six states are investigating and another is suing a national health insurer that specializes in limited-benefit plans for individuals, the self-employed and small businesses. The scrutiny points to the need for doctors to verify that the services they perform are covered or that patients are financially responsible for them.

In an Aug. 22 lawsuit, Massachusetts Attorney General Martha Coakley accused HealthMarkets and its subsidiaries MEGA Life and Health Insurance and Mid-West National Life Insurance of failing to cover conditions and benefits required by state and federal law and of misrepresenting the benefits, limitations and terms of its policies. The state also charged that the company illegally made health insurance policies conditional upon the purchase of association memberships and that it unfairly disclosed personal information about insured consumers to third parties.

Limited-benefit or scheduled-benefit plans set strict caps on what they will pay for care by physicians or hospitals. The amount spent on treatment of specific conditions also may be restricted.

HealthMarkets denies the allegations and will fight the suit, said company spokeswoman Donna Ledbetter. It contacts new customers by telephone to ensure that they understand their policies, she added.

Massachusetts Medical Society President Dale Magee, MD, said the association hasn't received any formal member complaints about the company. But he noted that many physician practices cannot keep up with the nuances of small insurance companies and depend on insurers or patients to make good on claims. At the same time, coverage policies are so complicated that it is impossible for patients to act like consumers when they purchase insurance.