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Tips to avoid health insurance plans with loopholes

March 2, 2012 12:00:00 AM PST
Health reform was supposed to make decent health care coverage available to everyone at a reasonable cost. But the law isn't fully implemented yet, and many people are unwittingly signing up for insurance that barely protects them.

Judith Goss was stunned that the health insurance she'd paid for through her retail sales job wouldn't begin to cover her breast cancer treatment- it's expected to cost around $40,000.

"I cried," said Goss. "And my mom was with me. And my uncles offered to pay for a lot of my, you know, my bills and things."

Goss had a so-called mini-med plan from Cigna, which had low premiums but would only pay up to $2,000 toward her surgery and hospitalization.

"These mini-med plans are offered through jobs," said Nancy Metcalf from Consumer Reports. "If you are offered one, our advice is not to take it if you have any other option- including public programs like Medicaid."

At this point mini-med plans are legal, but they're supposed to be phased out by 2014. You can spot them because they carry the warning "does not meet the minimum standards required by the Affordable Care Act."

"Another type of coverage you should avoid is something called a fixed indemnity plan, which is easy to mistake for traditional health insurance," said Metcalf.

Indemnity plans are sometimes marketed to individuals as if they are major medical insurance, and they can cost as much- but don't be deceived.

"Indemnity plans will only pay out a fixed amount every year, no matter how sick you get," said Metcalf. "And they often don't cover important things like drugs, lab tests, or chemotherapy at all."

Consumer Reports says it's very important to read any policy you're considering thoroughly. And remember, a medical crisis can cost hundreds of thousands of dollars, so pick a plan with enough coverage.

If you can't get traditional major medical insurance through an employer, there is a federal website that lists health care plans available in your area and eHealthInsurance.com is also a good source to compare rates and benefits of all health plans in California.