Sick but Insured? Think Again

Companies selling individual coverage in California can, and do, reject applicants for everything from asthma to athlete's foot. These so-called underwriting guidelines allow the companies to pass up a significant portion of the population -- the people most likely to use medical services -- or charge them higher premiums. As a result, compared with group plan members, individual policyholders tend to be younger, healthier and cheaper to cover.

For others, consumer advocates say, the only way to ensure that they have health coverage is to get it through an employer.

In the individual market, "the deck is really stacked in favor of the companies," said Jerry Flanagan, a healthcare advocate with the Foundation for Taxpayer and Consumer Rights. "They are cash cows."

Indeed. At Blue Cross, the profit margins on its BC Life & Health individual policies were nearly twice that of its group business, according to state Insurance Department figures from 2004.

Blue Shield -- a nonprofit led by an executive who advocates universal coverage regardless of medical history -- says it can't afford to break ranks with the industry practice of selecting the healthiest customers.

Otherwise, "we will end up with all the high-risk people," said Blue Shield spokesman Epstein.

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High-risk is one way to describe Ariana and Natalie Nazaretyan, twins born almost three months prematurely. The girls, who are developmentally disabled, spend most of their playtime in therapy.

Blue Shield dumped them this year, before their first birthday, leaving their parents with bills approaching $1 million. It said George and Narine Nazaretyan failed to report a miscarriage and plans to seek fertility treatment.

The Nazaretyans say the Blue Shield agent was fully aware of all of that.

Without insurance, Narine can't get an operation to remove thyroid cysts that make breathing difficult. George fears losing his furniture restoration business and the ability to pay for the girls' care on credit because Blue Shield hired a collection agent to recover more than $98,000 it paid out before terminating coverage.

"Everything we've worked for, everything we have, can just go down the drain," he said.

After an inquiry by The Times, Blue Shield's Epstein said the company halted the collection effort.

lisa.girion@latimes.com