Two-Tiered Health Plan Allows People To Purchase Additional Insurance Coverage After Getting Sick

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Michigan-based American Community Mutual Insuranceis offering a new type of insurance plan that will have low monthlypremiums and allow policyholders to purchase up to $5 million inadditional 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.

AmericanCommunity on Friday will roll out the first of its two programs inTexas, which leads the nation in its uninsured rate, with 27% of stateresidents lacking health coverage, the Journal reports.Under the Texas plan, called Coverage on Demand, those enrolled in theprogram can purchase one of three limited-benefit plans with annualbenefit caps between $1,000 and $5,000 and with maximum deductibles ofno more than $500, the Journal notes.

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The cost ofa plan for a healthy 25-year-old male in Dallas would be $88 to $95 permonth, according to the company. Policyholders who become seriouslysick or injured could purchase a guaranteed $5 million of "catastrophiccoverage" 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 inTexas, said, "It's the right to hindsight in health insurance." The Journalnotes that the coverage would revert back to the original $5,000 orless when the plan is renewed the following year, meaning thatenrollees with long-term illnesses would have to pay the heftyactivation fee annually to maintain access to the catastrophiccoverage. Grandstaff said that people might be better served by seekingdifferent 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 Instituteassistant professor, questioned whether young adults could afford the$10,000 activation premium of the program. She said it might offerpolicyholders "false hope" of complete coverage. The company plans toroll out its second program, called Pay-As-You-Go, in Michigan, Ohioand Missouri in early 2008 (Terhune, Wall Street Journal, 9/14).

Reprinted with permission from kaisernetwork.org. Youcan view the entire Kaiser DailyHealth Policy Report, search the archives, and sign up for email deliveryat kaisernetwork.org/email. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, afree service of The Henry J. Kaiser Family Foundation.

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