Many Workers Now Have Health Insurance Policies with a $1 Million to $2 Million "Lifetime Maximum." What Happens When You Exceed It?

Brenda Jordan says she’s been getting phone calls lately from people who thought they had adequate health insurance, but learned it ran out after a few big claims, leaving them without coverage.

Jordan, a volunteer assistant for We Care, a Jacksonville organization that provides medical care to people without health insurance, said that can happen to people who don’t read up on their employee-provided health insurance after they receive it, or if they select the wrong policy.

"It does affect a lot of people," she said.

Twenty-two percent have policies with a $1 million to $2 million "lifetime maximum," or cap, according to the Henry J. Kaiser Family Foundation, a Washington, D.C. think tank.

And if they wind up with a catastrophic illness or get into a traumatic accident requiring multiple surgeries, they can use that money up in less than a lifetime.

"When you hit that point, where are you going to go?" asked Tim Lawther, assistant director of the Duval County Health Department. "A lot of people in this community are one surgery away or one major illness away from bankruptcy."

Steve Binder, 46, of Jacksonville, had both kidneys and his liver transplanted because he had polycystic kidney disease, a genetic disorder that forced him to be on dialysis by 31.

One of his kidneys was transplanted in 1994 at a cost of about $100,000; the other kidney and his liver were transplanted in 2002 at a cost of about $360,000, he said. The policy he was under in 2002 had a cap of $2 million, but he didn’t approach it, even with his surgery and ongoing need for expensive anti-rejection medication.

But he said he expects that those procedures, if performed today, would cost more, considering cost increases in health care.

Jacksonville resident Len Geiger has Alpha-1, a rare disease that necessitated two hip replacement surgeries and a double lung transplant. If his health insurance had been capped at $2 million, he estimated that between his surgeries and treatments, he would have exceeded it in a couple of years, he said.

"I’d probably owe a lot of money," he said. "But it’s not like I could not do the things I had to do."

Price Index Communications, which has tracked health care insurance for more than 15 years, said in a release last year health care costs had inflated 23 percent between 2002 and 2007.

When the health insurance coverage bottom falls out, Lawther said, Jacksonville residents might need to go to one of the city’s five health centers dedicated to treating indigent people and others without health insurance, Lawther said. Or they might find themselves going to a hospital emergency room for primary care because they won’t be turned away, he said.

"There’s a significant number of folks in Jacksonville, who either have no insurance or inadequate insurance, who go to the emergency room for all of their care," Lawther said.

Lawther said he thinks some of those people lost coverage due to caps.

"I would imagine that does happen in Jacksonville," he said.

Blue Cross and Blue Shield company spokeswoman Valerie Rubin said her company offers a variety of health insurance packages so employers can afford to offer health insurance to their employees. Some of the company’s low-cost offerings have $1 million caps, some have $5 million caps and one is unlimited, she said recently.

"We’re adding more and more products to the low end of the ramp," she said.

Rubin said it’s important that people read the materials that come with their insurance so that they’re not surprised by a cap or other coverage limitations.

Mayo Clinic Jacksonville Vice Chairwoman of Finance Joan Weber said that the clinic occasionally sees patients who reach their cap, but that the crunch affects only a small percentage.

Jerry Flanagan, health care policy director for California-based consumer organization Consumer Watchdog, deals with complaints from around the country from people who thought they had unlimited insurance but found their policies were capped.

"We also hear from employers who don’t realize these caps are part of what makes up their insurance policy," he said. "You can go through $1 million in two or three surgeries. Health care costs are inflating rapidly."

Kaiser’s 2007 annual employer health benefits report found that about half of American workers with health insurance had no lifetime maximum, and it appears to be on the rise. In 2000, 21 percent of U.S. employees were on plans with no caps; 63 percent were capped at $1 million or more and 6 percent were capped at less than $1 million.

"Everyone’s going to the higher maximums of $5 million," Ray Strickland III, regional director of Benefit Advisors Jacksonville, said. "I think the market has demanded the caps to go up."

Paul Fronstin, director of health research and education programs for the Employee Benefit Research Institute, a private, nonprofit research institute based in Washington, D.C., agreed that rising health insurance premium costs – last year’s average increase was 6 percent, he said – have spawned a myriad of plans customized so employers and employees can afford it.

"The purpose of the cap is to keep insurance affordable for people who need it," Fronstin said. "But you’re taking away the benefit from people who need it the most to keep it affordable for people who might not need it at all."
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