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Does Your State Protect You From Your Health Plan?

A new survey of state health insurance regulations across the country reveals why insurers deny coverage to millions of Americans with common ailments and sometimes refuse to pay the bills of those who are insured. The survey’s conclusion: “Most states fail to protect consumers against insurance company abuses.”

The 50-state study, released by Families USA, a consumer watchdog organization, is the first to give a state-by-state picture of individual health insurance—the kind that consumers increasingly seek to purchase for themselves and their families as employer-based health coverage declines.

“Without adequate protections,” in this market, the study says, “insurers can deny people coverage, charge exorbitant premiums, and even revoke people’s policies without warning.”

The survey, “Failing Grades,” provides a report card of state insurance regulations in 14 categories of consumer protections. Among its findings:

• Only five states ban insurers from “cherry-picking” the healthiest applicants and excluding others. The five states—Maine, Massachusetts, New Jersey, New York and Vermont—require insurers to sell coverage to all who apply for it.

• In 35 states and the District of Columbia, there are no limits on how high insurers can raise premiums based on a person’s state of health.

• Only New Jersey, New York and Washington require insurers to spend at least 75 percent of premiums on health care.

• In 21 states and the District of Columbia, insurers can continue to exclude coverage of a preexisting health condition for more than a year after a policy goes into effect. Only two states (Massachusetts and New Mexico) limit this exclusion period to six months or less.

• In 44 states and the District of Columbia, insurers can suddenly revoke a policyholder’s coverage without any review by the state. Only Connecticut requires insurers to get permission from the state before revoking someone’s coverage because of their medical history. In 19 states, consumers have no appeal rights if their coverage is revoked.

• In 29 states and the District of Columbia, insurers can deny legitimate claims by digging back years into a policyholder’s medical history and alleging they failed to disclose, or should have known about, the health condition that led to treatment and claims for payment.

Robert Zirkelbach, a spokesman for the industry trade group America’s Health Insurance Plans, paints a brighter picture. “Individual health coverage is more affordable and accessible than is widely believed,” he says. “However, we recognize that some individuals are falling through the cracks, and we have taken steps to address that issue.”

In a report released last December, AHIP proposed “Guaranteed Access” plans for uninsured people with high medical costs, including those with preexisting conditions. Such plans could be set up and run by the states as “public-private partnerships to ensure that people in their states have access to coverage,” says Zirkelbach. “The key is that everyone has access to health coverage. If everyone is in the system, that eliminates the need [to screen applicants] for preexisting conditions.”

But “the individual health insurance market is still the wild, wild West for America’s health care consumers,” said Ron Pollack, executive director of Families USA, in releasing the new state survey. “It is a market with many abuses and with far too few state-level consumer protections.”

Federal law prohibits insurers from dropping coverage based on someone’s health status. However, insurers often exploit loopholes in this law, the study says. “Insurers can drop coverage if a person is said to have ‘misrepresented’ his or her condition on an application. And insurers in most states can add vague clauses to contracts that exclude coverage for unnamed preexisting conditions.” Only 18 states set a standard for defining preexisting conditions, the survey found.

About 89 percent (or 52 million people) of those looking for individual health insurance don’t get it because it’s too expensive or they’re turned down, according to a 2006 survey conducted by the Commonwealth Fund, a Washington health policy research group.

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