I spent a little time last year on the issue of Mega Life and Health. There’s only one term for this company, and what’s really frightening is that it’s a major player in AHIP. If AHIP is ever going to get itself out of the self-serving position it’s in and transition to being an organization of responsible private health plans that can have a reasonable conversation about the positive role health plans can play , the plans who could live in a future of community rating need to leave, or jettison the scumbags like Mega.
What’s the activity I’m so upset about?
Mega Life and Health sells health insurance door to door to poor to middle and low income working people. They claim that they are selling a product which their customers understand. But the point their customers clearly do not understand is that the insurance has severe limits on what it pays, especially what it pays per day in cases of expensive care. So if a policyholder gets sick and needs hospital care, Mega only pays out a fraction of what the hospital charges, leaving the poor sucker patient on the hook for the rest. Last year the California Supreme Court ruled that this con, like all the best cons, is legal. And this type of policy continues to be sold (more or less legally) in most states.
Over at Colorado Health Insurance Insider
I found this tale of woe of an electrician earning $40,000 a year with
no benefits who joined Mega’s front organization the National
Association for the Self-Employed after being sold a bill of goods
by a commissioned sales rep. His son had cancer and ran up bills of
$500,000 of which Mega paid out $45,000. It’s not completely clear
from the story at which point Mega cut them off, but if the story from
the couple who sued in the California Supreme Court is an indication,
what probably happened is that the policy had a maximum per diem
payment of less than 10% of what was actually billed. And now
bankruptcy and poverty awaits.
Mega has already dealt with class action suits because it’s been selling policies through a front organization that many states find illegal. More importantly it has been selling these policies using a network of barely-trained door to door agents. For example as reported in the Mobile Register (AL) several former employees show that the company had no ethics and hid what it was doing from its customers.
None of the three former Mega agents — Chaney, Aplin and Parrish
— had insurance sales experience before joining the company. Each said
they left the company after they learned more about other health
insurance policies. "The training was how to close a deal. It wasn’t
about the nuts and bolts of insurance," 33-year-old Aplin said. Chaney,
29, said he worked for Mega about four months before he saw another
insurance company’s policy and began to believe he was selling
incomplete coverage. Salespeople "don’t even talk about the insurance,"
he said. "You talk about the NASE and then you get them and you go. "I
didn’t know that the insurance was linked to the NASE," Chaney said.
Parrish said the experience has been hard for her personally. "I wish I
would have had sense enough or the insight enough to have researched it
before I got into it," said Parrish, who said she checked with the
Better Business Bureau and Alabama Department of Insurance but did not
detect any warning signs. <SNIP> In the beginning, she said, she
thought it strange that she would be sent to pursue potential clients
in areas an hour’s drive from home while other agents were assigned to
Dothan. She said she found it odd that her paychecks came from her
district manager’s personal account rather than from the company.
Parrish said she also wondered why her questions at staff meetings
seemed to her to go unanswered and why agents were not supposed to
leave promotional materials in the homes of people who did not buy a
policy. Mega agents she knew were not supposed to use insurance terms,
but to sell the benefits of NASE membership and its preferred
providers, she said. Now she believes, they were "giving those people
Does anyone believe that these sales people clearly
communicated the exact nature of the policies they were selling, and
exactly how much it would cover of a share of a severe illness? And
yet, this is the type of activity that both the Shaddeg bill and the
push towards unregulated individual insurance — promoted by the Bush
Administration and many others on the free-marketeer right — will
encourage. We also know that it’s similar to the activity that many
managed care plans are using selling Medicare Advantage plans (or at
least were until thy voluntarily agreed to desist earlier this year).
I’ve also been told by someone who knows a little more
about Mega that some 30% of revenue goes to the commissioned sales
agents and that the medical loss ratios for the insurance plan is below
30%! Even Arnold Schwarzenegger thinks that MLRs shouldn’t drop below
So what if anything can be done about this? Mega Life and
Health is now not only the poster child for all that’s wrong with
health insurance–it’s squarely in the mainstream. Why
do I say that?
Well it’s time to connect the dots.
Take a look at the governing body of AHIP, the health plans’ trade association. William J. Dewed, the
Chairman, President & CEO of Health Markets, which owns Mega Life
and Health, is on the board. HealthMarkets is right there next to
people like Mark Ganz from Regence, Scott Armstrong from Group Health
Cooperative of Puget Sound, Charles Baker from Harvard Pilgrim, not to
mention CEOs of several other big non-profit Blues and George Halverson
from Kaiser. And of course Angela Braly and Jeannine Rivet,
representatives of what we hope might be new guards at Well point and
United, are there too.
Now several people may be ready to say "a pox on all
their houses" and believe that no good at all can come from private
insurance companies. But many of those health plans are supporting, in
name at least, reform efforts in which companies like Mega Life and
Health would be barred from selling these type of policy. Furthermore,
it’s in the best interest of those larger organizations to have a
serious conversation about the practical help that health plans can
bring to a reformed health care market. Many of those organizations
have decent proposals and something to offer. Mega clearly does not.
So step one in cleaning up their act would be for those
insurers to either jettison their scumbag colleagues from AHIP, or to
Step two is not AHIP’s to make. It is though equally important.
Who owns Health markets? Like many companies it’s owned
by "private equity". But in this case these are not just any private equity companies. The three owners are a) the biggest and
now publicly traded private equity firm, Blackstone Partners, b) the
most prestigious and most profitable investment bank, Goldman Sachs,
and c) a unit of giant European investment bank Credit Suisse. While
the owners and employees of these august organizations are making their
mega-millions, it’s about time that they paid some attention to what
their "investment" is doing to the people it’s supposedly serving.
These connections need to be made.
We’re not talking fraudsters on the margins, we are
talking about them being aided and abetted by the privileged sitting
inside the gilded palace. And if those investment organizations can’t
bring themselves to change Health Markets out of shame, then perhaps
some Democratic congressmen can help them.
This is a case where for their own good, these organizations should do the right thing.