Report Raps

Report Raps Association Insurance
Chad Terhune
2005-11-08

    672 words
    11 March 2004
    The Wall Street Journal
    D3
    English
    (Copyright (c) 2004, Dow Jones & Company, Inc.)


State lawmakers and insurance regulators should do more to curb sales abuses and deceptive practices in the growing market for health insurance sold through associations, according to a report scheduled for release today by a national consumer group.

The report by Families USA, a consumer-advocacy group in Washington, calls on state officials to require that associations offering coverage represent the interests of their members rather than the insurer. These loosely defined associations, which typically require consumers to join and pay dues to the nonprofit group in order to purchase a policy, are often under "de facto operating and financial control of the insurers they endorse," Families USA said.

Many associations, particularly those serving a specific profession such as farmers or lawyers, act in the best interests of their members in selecting a health insurer.

The associations with questionable ties to insurers typically profess to represent consumers in general and they offer discounts on travel, phone service and other items. But the reason most people join is to purchase the insurance.

The group also urges states to crack down on unfair rating practices and misleading sales pitches that can give policy buyers the illusion of group coverage, which is often seen as providing lower costs and better long-term value.

The Families USA study found that many association policyholders are hit with steep, unforeseen premium increases after enrolling at low "teaser" rates. Many consumers also complain about being saddled with huge medical bills because the insurer and its agents misrepresented coverage limits to make the sale.

More consumers find themselves shopping for an individual health policy due to layoffs and a decline in employer-sponsored coverage amid rising health-care costs and a weak economy.

In response, insurers are stepping up their sales efforts to individuals, and some of the biggest companies, such as UnitedHealth Group Inc., are choosing to market through associations. In November, UnitedHealth bought Golden Rule Financial Corp., one of the leading providers of association policies. A spokesman for UnitedHealth said consumers find Golden Rule's products "very attractive."

Merrill Matthews, director of the Council for Affordable Health Insurance, an Alexandria, Va., trade group representing insurers, said companies selling association policies are reviewing their practices in light of recent criticism. The industry is in a "transition now on how is the best way to market these products to individuals," he said. "They do provide access to affordable health policies in many states."

Mr. Matthews said he sees nothing unethical in an insurer having close ties to an association and he doesn't think companies mislead consumers into thinking they are buying traditional group coverage.

Many states exempt these association policies from numerous regulations, especially regarding rates, on the assumption the nonprofit groups are looking out for their members. In return, most states require that an association offering policies be formed and maintained for purposes other than the sale of insurance.

However, in many cases the nonprofit groups appear to be little more than marketing arms for insurers or insurance agencies. This practice was the subject of a November 2002 page-one article in The Wall Street Journal.

"Consumers feel the association is created to protect their own interests when in fact it was established to protect the interests of the insurance companies," said Ron Pollack, executive director of Families USA.

Families USA said these industry abuses reflect the "spotty and largely inadequate regulatory system" for these health policies. The advocacy group plans to share its findings and recommendations with state officials convening in New York this weekend during a meeting of the National Association of Insurance Commissioners.

Several states, including Massachusetts and Iowa, have been examining business practices in the association health market and considering the need for further regulation.

Two major insurers in this market, Mega Life & Health Insurance Co. and Mid-West National Life Insurance, both units of UICI, a Dallas insurance company, have drawn scrutiny from state regulators and plaintiffs lawyers working on behalf of policyholders.

We are Looking For anyone that might have an intersting story to share regarding a bad experiance with a company. That they have or had insurance with. We want to be consumer advicates.

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