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Boston, MA — A California-based national consumer group chimed in on the state’s new health insurance law, calling on decision makers here to establish insurance policies that cap out-of-pocket expenses at $7,500 per individual and $10,000 per family.

The non-profit Foundation for Taxpayer and Consumer Rights (FTCR), in a letter to the Massachusetts Health Insurance Connector Authority, also urged the board to ban limits on what insurers will pay per treatment or illness and include “affordable” prescription drug coverage.

The Connector Authority is deploying a series of subsidized and free market insurance products with the goal of delivering health insurance to about 500,000 uninsured Massachusetts residents. State law requires most Bay State residents to have insurance by July 1, 2007, or face tax penalties.

The foundation is cautioning the board to avoid “junk insurance plans,” which offer benefits that could leave beneficiaries vulnerable to financial disaster or without sufficient basic coverage options.

The foundation announced its recommendations Thursday because a Connector Authority policy committee is meeting to discuss insurance regulations Friday and the full board expected to vote on the initial draft regulations on Monday. A public hearing on the rules is scheduled Feb. 16 and the board plans to take a final vote on March 8.

“It’s important to send this letter now because it is when the baseline rules for what it means to be insured will be put forward,” said Carmen Balber, foundation’s consumer advocate.

The policy committee is drafting “minimum creditable coverage” regulations, which would set standards before the individual mandate starts in July. “Underinsured” individuals enrolled in health plans that fail to meet the state’s minimum criteria would face the same financial penalties that uninsured residents would, under the new state law.

In the letter to Connector Director Jon Kingsdale, Balber said medical bills accounts for half of all individual bankruptcies in 2005 and cautioned that with the law’s mandatory insurance requirement “more families are likely to be at risk of bankruptcy unless their mandated insurance policy protects them against financial disaster.”

Balber goes on to mention how a California resident was left with $450,000 in unpaid medical bills after her husband died of cancer because she was insured with Mega Life and Health Insurance Co., which also insures Massachusetts residents. Balber said the “junk” health insurance plan did not cap her out of pocket expenses.

“The question is whether an insurance protects them of serious medical conditions so they are not faced with unpaid medical bills that could result in bankruptcy,” Balber said.

During past board discussions on the regulations, members expressed concern with Mega Life and Health Insurance health plans for “inadequate” health coverage.

Kingsdale said the letter’s request “sounds more than reasonable to me.”

“Capping out of pocket expenses is something the policy committee would want to do,” said Kingsdale, adding that in November, the committee suggested a lower dollar figure for maximum out-of-pocket expenses, but said he could not recall the exact number. “I want to be very clear that they want an out of pocket maximum.”

Richard Powers, spokesman for the Connector Authority, said there are about 30,000 Massachusetts residents enrolled in plans offered by Mega Life and Health Insurance Co.

“We anticipate that once the Minimum Creditable Coverage is set that these people will have to get better insurance,” said Powers. “From what we’ve seen, they would not meet the Minimum Creditable Coverage.”

California Gov. Arnold Schwarzenegger filed his own health reform bill that emulates several aspects of the Massachusetts plan and Balber said the national group felt compelled to comment on the rules.

“It’s not just California but many states are watching what Massachusetts is doing,” said Balber.

Consumer Watchdog
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