If there could be anything worse than waking up in a hospital after a seizure and having doctors tell you you've got a brain tumor, it might be discovering that the health insurance you've been paying $500 a month for is junk.
Ruth Bjorklund says it happened to her. In May 2007, the Bainbridge Island resident had to be airlifted to Harborview Medical Center, where she underwent surgery to remove the tumor. She was left with nearly $150,000 in bills that she says her insurer, Nationwide Life Insurance, didn't pay.
Technically, the company wasn't obligated to. Unbeknownst to Bjorklund, she had bought a very limited plan under the Nationwide Specialty Health brand believing, because her employer said so, that it was comprehensive group coverage similar to what she had while working for the county as a librarian.
After she found out it wasn't comprehensive coverage in June 2007, she filed a complaint with the state's Office of the Insurance Commissioner and, last week, armed with findings from its investigation, Bjorklund and two other Nationwide policyholders filed a federal class action lawsuit against the Ohio company.
The suit says it was illegal for Nationwide to sell such limited-pay plans in Washington state in 2007 and that representations made about the coverage violate Washington's Consumer Protection Act. Bjorklund's attorneys are demanding that Nationwide either reimburse the premiums paid by the 468 current or former policyholders that the company has identified in the state or convert their limited policies to full coverage that will pay their medical bills retroactively.
The policy that Bjorklund got from Nationwide is called a "fixed-payment indemnity plan," the type that promises to pay a set amount for hospital stays -- in Bjorklund's case, up to $1,000 a day. But the policy is filled with so many exclusions and loopholes that "it's not worth the paper it's written on," says Bjorklund's attorney, Eleanor Hamburger of Seattle's Sirianni Youtz Meier & Spoonemore.
It's a type of policy, Hamburger says, that state law prohibited from being sold by itself prior to July 2007, when she says insurance industry pressure helped change the law. Before then, "limited medical benefit plans like this one were illegal when they were sold as stand-alone policies," she says. "You couldn't sell them unless they were sold as a supplement to comprehensive health care."
Hamburger adds that, until August of last year, Nationwide didn't even have the authority required from the insurance commissioner to sell any products in Washington state. Elizabeth Stelzer, a spokesperson for the company, says Nationwide is aware of the litigation, but "will withold comment on the allegations until we have a chance to fully review the case."
At the time Bjorklund bought the policy, she told reporters at an April 16 press conference with health care reform advocates from the Washington Community Action Network, she worked at home, where she was paid by a trust that she and her husband had set up to care for their disabled daughter. The $100-a-month stipend that she got came through a company called Risk Management Strategies, which offered her the Nationwide plan in the fall of 2006 as her individual policy through Group Health Cooperative was about to expire.
Group Health's premiums had just gone up and "when I heard 'group policy,'" she says, " I was really excited that we might have the coverage." Because the plan offered doctor visits, discounts on prescriptions and hospital coverage, "I went for it," she says.
It was only eight months later, after her seizure and surgery, that she learned it was a limited-pay plan, but when she tried to find another policy, she got a ruder shock.
A letter came to her in June 2007 on insurance company letterhead with the slogan "Nationwide On Your Side" at the top. It informed her that "this plan is not intended to replace or provide Major Medical Insurance and is not creditable coverage under HIPAA" -- the federal Health Insurance Portability and Accountability Act of 1996.
For all practical purposes, that meant she couldn't even get another policy: Without previous "creditable" coverage, other insurers can exclude pre-existing conditions such as the tumor that Bjorklund hopes never comes back.
"At the time when I was trying to recover my health, I found myself completely stressed out by not having health insurance," she says. "It was an incredibly overwhelming experience and I hope that people are careful with these discount plans."
It's unknown, Hamburger says, how the plans were sold in Washington state and who misrepresented them as group coverage -- something she hopes to learn in the lawsuit. Nationwide sold the plan to 22 employers with headquarters in states where such limited-pay plans were legal, which she anticipates the company may use as a defense.
Hamburger says the 22 employers are low-wage companies such as Dollar Tree, Discount Tire, Circle K and Rest Care, a home-care company that employs John Gabriel and Lauren Gustafson-Omer, the lawsuit's two other plaintiffs. That's probably not a coincidence, she says.
"I suspect that this plan is packaged, marketed and sold to employers with a pitch that you don't have to pay anything for it" in fields where it's hard to retain workers, Hamburger says. "It is so low cost that you can say to [employees] you're offering health insurance, even though it really doesn't provide much."