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David Beach, of Hemet, found out the day before he was to start chemotherapy that the extra cancer coverage he thought he had been paying for since 2003 would not help him.

"It turns out to be worthless," Beach said of the policy. "I thought (the treatment) all was supposed to get covered. It's like getting kicked in the stomach."

He and his wife, Michele, said they asked for cancer coverage when they bought their policy from what is now known as Mid-West National Life Insurance Co.

There was a prevalence of the disease on Michele Beach's side of the family, and the couple said they wanted to be prepared if it hit her.

"We specifically talked to (the salesman) about this," recalled David Beach, 41. "He was referred to us by a friend. We basically trusted him."

The salesman promised more than the policy covers, he said. The Beaches' policy covers up to $100,000 of lifetime treatment, caps payments at $1,000 a day and doesn't pay for all the drugs that are part of a chemotherapy treatment, he said.

David Beach's first three, eight-day chemotherapy treatments for the aggressive cancer between the muscles in his left thigh, a sarcoma, are expected to cost $581,000, he said.

He said he has been told that typically the survival rate is 50 percent as long as the cancer doesn't spread to the lungs. There is an 85 percent chance of recurrence within five years.

Mid-West is an affiliate of HealthMarkets Inc. of North Richland Hills, Texas.

HealthMarkets spokeswoman Donna Ledbetter declined to answer questions about David Beach's situation, citing privacy restrictions.

She said the company is reviewing it.

In 2008, HealthMarkets agreed to pay $20 million to settle claims made by 35 states, including California.

Regulators cited problems with consumer disclosures, agent oversight and training, complaint handling and claims handling. They questioned whether agents fully explained policy limits to customers.

CALIFORNIA'S SHARE

California got $2 million of the settlement.

In August, Massachusetts announced a $17 million settlement with HealthMarkets and two subsidiaries that barred them from selling health insurance in the state for five years.

The state accused the company of misrepresenting policies.

As he scrambled for treatment alternatives, David Beach, who is self-employed, said he discovered in October that the Los Angeles city attorney's office had sued HealthMarkets Inc. and its affiliates, including his insurance company.

The lawsuit accuses the companies of training salespeople to deceive customers and get them to buy policies filled with exclusions and limitations.

The California Department of Insurance wouldn't comment on HealthMarkets or say whether it is investigating the companies.

Generally, complaint information filed against any insurance company in 2010 won't become public until the middle of this year, said department spokesman Dave Althausen.

Reasons for complaints aren't released, he said.

Consumer advocates say national health care reform is needed to prevent companies such as HealthMarkets and its affiliates from taking advantage of people when they need insurance coverage.

The companies make money because they sell low-cost premium policies that have unlimited out-of-pocket costs but many limitations and exclusions, they said.

SELLING STRATEGY

The companies target the self-employed, those who have difficulty finding coverage or people ignorant of the health care market and how much treatment can cost, experts said.

Anthony Wright, executive director of Health Access, a Sacramento nonprofit advocacy group, said such insurance policies skimp on coverage and can force people into bankruptcy.

Jamie Court, president of Consumer Watchdog, a Santa Monica-based nonprofit advocacy group, said limits on out-of-pocket consumer health care costs established by national health care legislation could put companies like HealthMarkets and its affiliates out of business.

"Policies that cap at $300 a day are not insurance," he said.

"They sell policies that are worth nothing. This is the most egregious scam."

People looking for insurance need to thoroughly research companies and ask questions about coverage before buying policies, Court said.

The federal health care law passed last year requires insurers to spend 80 percent of customer premiums on medical care beginning Jan. 1, 2011, or pay rebates beginning in 2012.

However, the insurance industry and some state insurance commissioners have tried to get exemptions to the medical-loss ratio regulation.

They claim the regulation could force insurance companies out of business and drop policyholders.

500,000 CUSTOMERS

HealthMarkets insures roughly 500,000 customers nationwide.

It spent about 60 percent of customer premiums on medical care in 2009, according to regulatory filings.

The company claims that the new medical-loss ratio regulation could force it to stop selling policies and drop policyholders, the filings state.

Wednesday, California's newly elected insurance commissioner, Dave Jones, said he intends to hold insurers to the 80 percent medical-loss ratio rule.

David Beach said he complained to the State Insurance Department about Mid-West last year but was left with the impression that little would come of it.

"They weren't terribly helpful," he said. "They told me, 'We really can't do much.' "

Meanwhile, David Beach restructured his businesses and liquidated assets to qualify for government medical coverage.

He said Mid-West hasn't paid anything since the couple began calling the company in October.

"You prepare yourself mentally for the battle with cancer and chemo," David Beach said.

"You don't expect this. Review your policy and make sure you have sufficient coverage."

Reach Lora Hines at 951-368-9444 or [email protected]