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Consumer Reports: 'Junk' health insurance plans still a problem Posted: February 16th, 2012

By Maryalene LaPonsie

Citing coverage "as skimpy as a hospital gown," Consumer Reports is warning Americans to beware of mini-med health insurance plans. The plans are identified as those that provide limited coverage -- - with some capping benefits at as little as $2,000 per year.

While provisions of the Patient Protection and Affordable Care Act were supposed to effectively have eliminated mini-med plans by fall 2010, the federal government has issued more than 1,000 waivers allowing companies to continue to offer this limited medical insurance.

Mini-med plans and health reform

In 2010, two provisions of the act were implemented to ensure consumers had greater access to comprehensive health insurance coverage. The first prohibited insurers from capping annual benefits at less than $750,000. In 2011, that limit increased to $1.25 million.

The second provision required health insurance companies to spend at least 80 cents to 85 cents of every premium dollar received on direct health care expenses.

Some employers argued they would be unable to provide health insurance coverage to their workers under these provisions. Most notably, in a memo obtained by The Wall Street Journal, McDonalds told federal regulators it was considering dropping medical insurance for 30,000 hourly workers if it was forced to comply with the medical loss ratio requiring 85 percent of premiums to go to health care costs.

In response, the Department of Health and Human Services applied a "methodological adjustment" to how it calculated medical loss ratios for mini-med plans. It also issued waivers to companies that did not feel they could meet the minimum annual benefits required by health reform. According to Consumer Reports, as of January 2012, waivers were granted for 1,231 health insurance plans covering 3.9 million individuals.

Finding quality health insurance coverage

As a condition of issuing the waivers, the federal government has required mini-med plans to clearly state their annual cap on health insurance coverage in the plan literature. In addition, the waivers will expire in 2014, when health care reform will eliminate all benefit caps.

In the meantime, Consumer Reports recommends individuals beware of health insurance plans sold through methods such as robo-calls, late night infomercials and unsolicited faxes. The group also advises consumers to search for more comprehensive coverage using the following strategies:

  • Search for health insurance plans on the government website HealthCare.gov.
  • Consider COBRA coverage if you are leaving a job that currently provides medical insurance.
  • Investigate high-risk pools offered by states for people with pre-existing conditions.
  • Look into public programs such as state Children's Health Insurance Programs (CHIPs) that offer affordable health insurance options.