A consumer advocacy group filed a lawsuit this week against health insurer Aetna Inc., one of its subsidiaries and the Connecticut Department of Insurance, hoping to stop the sale of new health insurance plans it claims are a scam.
Phil Wheeler, president of Citizens for Economic Opportunity, said the state is allowing Aetna to sell plans to employers that are designed to mislead workers into believing they have adequate coverage when they may receive only $1,000 in annual maximum benefits.
Wheeler said $1,000 of coverage can be used up in a matter of hours for a typical emergency room visit.
“These plans are designed not to be there when you need them,” Wheeler said at a news conference. “It’s like having an empty fire extinguisher on the wall.”
Citizens for Economic Opportunity said it learned about the plans through a tip from an anonymous state employee. The state insurance department agreed in September 2005 to allow Aetna to sell the plans through Strategic Resources Co., a South Carolina firm acquired by Aetna in 2004.
“We think Connecticut has a law that outlaws these plans,” said Dan Livingston, the lead attorney for CEO. Livingston said his group, a statewide coalition of labor unions and community and citizen action groups, hopes the insurance department will rescind approval of the plans.
Aetna spokeswoman Cynthia Michener said the plans are a “limited benefits product” designed for part-time and seasonal workers who otherwise do not have access to health insurance. She said such plans are “a bridge” to help move people from the rolls of uninsured to having more comprehensive coverage.
“More than 45 million Americans are uninsured. This lawsuit is a political maneuver that misses the point and misleads the public,” she said. “We’re frankly perplexed that this group would prefer people go without health coverage altogether. If not for a product like this, these people would have no health insurance.”
Michener said these plans provide guaranteed coverage and are not medically underwritten.
The state insurance department said Connecticut law does not prohibit the sale of limited health insurance policies. The department required Aetna to clearly disclose in each policy that the consumer was not purchasing comprehensive medical coverage, according to a written statement issued by the agency.
The department also required Aetna to file quarterly reports so state officials can monitor the sales and use of the insurance plans to ensure companies are not using the product to replace traditional, comprehensive policies.
Seven plans have been purchased in Connecticut, according to the department. Copies of the reports show most of companies are temporary staffing services.
“In requesting approval for this product, Aetna stated that these plans were developed specifically for part-time or temporary employees who may be uninsured or who cannot afford the premium payments for the more traditional major medical plans,” the statement said.
In 2004, Aetna acquired 100 percent of Strategic Resources stock and the company’s insurance contracts for approximately $250 million.
Founded in 1976, Strategic Resources is one of the largest providers of limited benefits to part-time and hourly workers in the country. At the time of the sale, the firm was administering benefits to more than 700 employers in 46 states and the District of Columbia. It’s Web site touts its insurance plans as a way to reduce employee turnover among part-time workers.
“Hourly employees, especially those working part-time, tend to look at their jobs as temporary and not as a career. This doesn’t tend to foster a sense of loyalty,” the site reads.
The suit was filed with state judicial marshals who were expected to begin serving the defendants Wednesday.
Attorney General Richard Blumenthal said his office will investigate whether the policies harm consumers or undermine state-mandated coverage requirements. There are approximately 50 consumer protections written into state law concerning health insurance, such as required stays in hospitals for mastectomies.
“I am very concerned that these policies dilute or circumvent minimum coverage standards, which I have strongly advocated,” Blumenthal said.
Shares of Hartford-based Aetna Inc. closed at $38.53, down $1.02 Wednesday afternoon on the New York Stock Exchange. The shares have been trading between $30.94 and $52.48 over the previous 52 weeks. The company is due to release its earnings Thursday.
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