Spotting Questionable Health Insurance Plans

Feb. 2, 2010 — -- Health care overhaul is stalled, resulting in a proliferation of plans that don't fully protect people, officials said.

Watchdogs worry about two kinds of plans in particular. First, are health discount cards that say they get you cut rates on medical services but are not widely accepted. Second, are limited-benefit plans that offer such skimpy coverage that a serious medical problem could still leave you stuck with enormous bills.

Click here for the tell-tale signs that you could be dealing with a questionable insurance plan.

As Tony Lloyd hit golf balls, pain seared across his shoulders making him weak. It was a textbook heart attack. But what happened next wasn't in any textbook.

"We never suspected anything," wife Mary Lloyd said.

As Lloyd lay in intensive care, his wife pulled out the card for a brand-new health plan she had purchased two months before. She hadn't realized it was not traditional health care coverage.

"The person in the patient accounting office said it was not insurance, and I was shocked," she said.

It was a United Service Association Healthcare discount card with limited medical benefits. You pay your own medical bills, but the card is supposed to get you a price break.

Critics said it's hard to find providers that participate in these programs, and that the discounts are tiny. The Lloyds said the hospital didn't accept their discount card, and they were left with a bill for $67,000.

"I have a hard time sleeping at night sometimes because I'm always thinking about how am I going to pay this bill?" Tony Lloyd said. "Are they going to take my house, or are they going to take my car? You know, I just don't know where it is going to end."

Limited-Benefit Plans

There's another kind of health coverage that confuses consumers: the limited benefit plan, which offers minor coverage for basic care. But you wouldn't know it by watching the TV ads.

One ad states the company can provide health insurance for "a little more than $5 a day."

The announcer shouts "real health insurance" but the fine print at the end of the ad notes "not major medical insurance and not meant to replace catastrophic ... coverage."

That's because the commercial is advertosomg for a limited-benefit plan, offered by American Medical and Life Insurance, or AMLI.

The state of New York called the ads misleading, fined AMLI $700,000 and forced it to pull the ads off the air nationwide.

"The average person wants coverage, and many times they can't afford coverage so they are vulnerable to these types of ads," New York Insurance Superintendent James J. Wrynn said.

New York went on to hold hearings about limited benefit plans that are marketed as something more.

The AMLI plan paid $1,000 a day toward hospital costs, when hospital stays cost more like $5,000 a day, and $100 toward high-tech tests, when they cost between $500 and $4,000, officials said.

"It really is totally inadequate," Wrynn said. "They just receive a small fraction of the cost. And most people who purchase these policies don't realize this until it's too late."

United Service Association told "Good Morning America" that the Lloyds membership packet and ID cards explained what kind of plan they were getting and that they had 30 days to cancel and get their money back.

American Medical and Life Insurance told us limited benefit plans provided valuable assistance for people who can't get more comprehensive coverage, and that they encourage all consumers to review product information carefully before making a decision.

To protect themselves, consumers can check with their state insurance commissioners to see if the health plans they're considering are properly licensed, and whether there have been complaints about the plans.

They can also search for complaints about the companies online, keeping in mind that troubled companies often change their names.

They should also insist on reading the policy paperwork before signing or sending any money.

Click here to see a list of telltale signs that you may be dealing with a disreputable health plan.