Low-cost insurer leaves bills and a bitter taste

ATTLEBORO -- Erin Chartier fumes every time she receives mail with her health insurance company's slogan: "Keeping the Promise of Affordable Coverage."

"It's affordable because they don't cover anything," she said. "It makes me so mad."

Chartier, 22, spends her days in a small apartment with her 2 -month-old daughter, Karli, who was born five weeks premature. Chartier and her husband, Earl, face about $50,000 in medical bills they thought insurance would pay.

They are insured by Mid-West National Life Insurance Co. of Tennessee , whose low-cost health insurance plans have generated similar complaints from other consumers. Mid-West National Life and a sister corporation, MEGA Life and Health Insurance Co. , are subsidiaries of HealthMarkets , a for-profit national company based in Texas.

The companies provide health insurance to only about 30,000 Massachusetts residents, but that number might grow. Some state officials say MEGA Life and other insurers that offer low-cost policies to small businesses could play a role in the state's attempt to expand healthcare coverage to all residents. The reform law requires all Massachusetts residents to purchase insurance.

Last week, MEGA Life was sued by Attorney General Thomas F. Reilly's office, which alleges the company used deceptive marketing, failed to cover mandated benefits, and improperly denied patient claims. Also, MEGA Life and Mid-West are the subject of a multi state examination by insurance commissioners, as well as the focus of a separate examination by the Massachusetts Division of Insurance .

The policies -- mostly purchased by people who work for small businesses -- feature premiums as low as $300 for a family, less for individuals. But they also contain a confusing mix of deductibles, co payments, and coverage maximums on physician visits, hospital stays, and tests.

Consumers contacted by the Globe said agents aggressively promoted the policies' $1 million lifetime benefit, with a single deductible of $1,000 for hospital stays. But limitations make the coverage illusory, say critics.

"These Swiss-cheese plans attract people with lower premiums, but they have lousy coverage," said Stephen D'Amato, a public interest lawyer and former Massachusetts state insurance regulator. "These kinds of plans should never hit the market."

The Chartiers' limited benefit plan cost Earl Chartier's employer, a small engineering firm, $336.06 a month.

But coverage for hospital room and board is capped at $400 a day -- Erin Chartier's expenses were five times higher, about $2,000, leaving the Chartiers responsible for $1,600.

Physician visits while in the hospital are limited to one per day, at $100, and office visits are covered up to $50. Miscellaneous hospital inpatient charges are covered at 80 percent, but only up to $12,000.

Such restrictions are necessary to keep premiums low enough to help people who lack access to the more comprehensive plans many large companies offer, said HealthMarkets chief executive William J. Gedwed in a written response to the Globe.

"Many insurers simply choose to ignore this underserved group of people," he said.

HealthMarkets says it is trying to improve service by training agents to give customers a more detailed disclosure of the coverage limits. Yet some consumers said MEGA Life and Mid-West agents they spoke with did not fully disclose the drawbacks to their policies. And the fine print, they said, was difficult to understand.

"The way that it's worded, a lay person could never figure out," said Linda Gilardi of Pittsfield, whose husband's quadruple bypass surgery in 2005 was only partially covered by MEGA Life. The family ended up with a bill for about $57,000, she said.

Gilardi said she and her husband asked a MEGA Life agent how their premium could be so low compared to large HMO plans, and the agent told them the self-employed and those who work for small companies "don't call in sick, they work, and they don't abuse the health plan, and we are able to pass the savings on to you."

Mid-West's and MEGA Life's products are examples of health insurance products dubbed by proponents as "consumer driven" or "consumer guided." The theory is that patients who are forced to pay a greater share of their own medical expenses will have an incentive to shop for better prices, driving down overall costs.

Critics say the plans make more profits for insurance companies and allow employers to shift costs to workers.

"It's troubling to me that we would do anything to encourage these types of companies to do business in Massachusetts without substantially more state oversight," said Laurie Martinelli, executive director of Health Law Advocates, which helps consumers cope with medical bills and file complaints about their bills and coverage.

"We have heard from more than a dozen consumers who have regretted buying these plans because so little is covered," she said.

Erin Chartier said the Mid-West agent who explained the healthcare plan last year did not disclose the coverage limitations. The family's medical bills have come from Brigham and Women's Hospital, its physician organization, and Sturdy Memorial Hospital in Attleboro.

"We try to pay on the big bills, $50 a month. It's hard to keep track of them all," she said.

After the Globe contacted HealthMarkets earlier this month to ask about the Chartiers , the company reviewed the case and contacted Erin Chartier last week. Chartier said the company offered to pay 80 percent of what the couple owes.

"I was pretty upset, because we had already spoken with the company about the misrepresentation of benefits, and they didn't seem to care what happened to us," she said in an e-mail. "Suddenly, they're on the verge of getting really bad press and now they want to talk?"

Mid-West said the agent who sold the policy to Earl Chartier's employer did disclose benefit limitations at a meeting Chartier attended, and also left behind brochures. But a telephone service representative did not fully inform the couple of their coverage limitations, said HealthMarkets chief executive Gedwed.

"This policy was never presented as major medical or a comprehensive policy," he said. "In this case, we did not accomplish our mission. We believe that doing the right thing is good business."

Christopher Rowland can be reached at crowland@globe.com.