Health Plan Lets Patients Purchase More Coverage After They Get Sick

Michigan-based American Community Mutual Insurance is offering a new type of insurance plan that will have low monthly premiums and allow policyholders to purchase up to $5 million in additional health coverage in the event of serious illness or injury, the Wall Street Journal reports. The plan is being marketed to healthy U.S. residents between ages 19 and 34.

American Community on Friday will roll out the first of its two programs in Texas, which leads the nation in its uninsured rate, with 27% of state residents lacking health coverage, the Journal reports. Under the Texas plan, called Coverage on Demand, those enrolled in the program can purchase one of three limited-benefit plans with annual benefit caps between $1,000 and $5,000 and with maximum deductibles of no more than $500, the Journal notes.

The cost of a plan for a healthy 25-year-old male in Dallas would be $88 to $95 per month, according to the company. Policyholders who become seriously sick or injured could purchase a guaranteed $5 million of "catastrophic coverage" with a one-time activation premium payment of $9,000 to $10,000, in addition to the basic premium.

Mike Grandstaff, chief executive of the American Community Precedent Insurance unit in Texas, said, "It's the right to hindsight in health insurance." The Journal notes that the coverage would revert back to the original $5,000 or less when the plan is renewed the following year, meaning that enrollees with long-term illnesses would have to pay the hefty activation fee annually to maintain access to the catastrophic coverage. Grandstaff said that people might be better served by seeking different coverage if they become seriously ill or injured.

Gary Claxton, a vice president at the Kaiser Family Foundation and director of the foundation's Health Care Marketplace Project, said, "It's troubling when a company is saying, 'We don't want you hanging out in this product if you get sick.'"

Mila Kofman, a Georgetown University Health Policy Institute assistant professor, questioned whether young adults could afford the $10,000 activation premium of the program. She said it might offer policyholders "false hope" of complete coverage. The company plans to roll out its second program, called Pay-As-You-Go, in Michigan, Ohio and Missouri in early 2008 (Terhune, Wall Street Journal, 9/14).