Making health plans clearer

Sunday, July 5, 2009 | 2:05 a.m.

Much of the debate over the need to provide comprehensive health insurance to all Americans has focused on the high percentage of individuals who don’t have any coverage. What has sometimes been overlooked is that many people have insurance, but not enough to prevent deep financial distress should they require major surgery or other expensive care.

Last week The New York Times wrote about Lawrence and Claire Yurdin, whose policy indicated they had coverage of $150,000 a year for hospital care. Excluded from the coverage, though, was nearly all of the heart treatment the husband received at a Texas hospital.

Late last year, the story noted, they were forced to file for bankruptcy as their medical debt approached $200,000.

Harvard law professor Elizabeth Warren, who has analyzed medical bankruptcies, issued a sound warning when she told the Times: “Underinsurance is the great hidden risk of the American health care system. People do not realize they are one diagnosis away from financial collapse.”

With that in mind, Congress should require health insurance companies to do a more thorough job of explaining the financial limitations of their policies to consumers. That is particularly important in the case of limited-benefit plans, which is what the Yurdins had.

Many people unwittingly put their trust in insurance companies, assuming their policies will cover major health problems. Too often, though, consumers receive the shocking news that their policies have more gaps than they realized.

Insurers should be more forthcoming in written material about the amount of money a policyholder can expect to pay out of his own pocket should he need a specific surgery or other form of medical treatment. This would give consumers clearer information about what is not covered in a policy, which would enable them to do a better job of financial planning.

Ultimately, Congress should find a way to replace limited-benefit plans with more comprehensive policies that would better protect consumers from the prospect of slipping into medical bankruptcy.