"Last night I had a bad night," Kathern Cathey says. "A real bad night."
The grape-sized tumor on her pancreas was causing even more pain than usual, so she chased the Vicodin she's been taking with a pill from the bottle of morphine she just had filled. She waited for the pain to subside. And waited. In the end, she just cried herself to sleep, as she's been doing for about a month now.
The problem started in April. She was plagued by stomach problems, but when she went to the hospital, she says, doctors couldn't find anything wrong. They just sent her back to her apartment in southwest Houston with a prescription for pain pills.
By this time, the 52-year-old had been without insurance for months. Cathey works construction, taking jobs here and there, for a few weeks at a time, with long gaps in between. She says she never had major medical problems before, so she simply did not maintain consistent coverage. But after that April visit, and the hospital bills for "nothing," she realized she had better find a policy.
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She found the solution one night, flipping around the television — an infomercial for something called Cinergy Health.
"If you have no healthcare coverage, do you really want to gamble with your health?" asked the host, who never got around to introducing himself. "Are you one of 47 million Americans without health insurance? Have you been putting it off because you thought it was too expensive, or couldn't qualify?...Cinergy Health can offer you significant health coverage at a reasonable price."
Significant health coverage. It can really make an uninsured person's ears perk up. And then the nameless host was suddenly joined by a woman.
"Joining me today to speak on this very important subject is health industry expert Alessana Fordin, who is a licensed mental health counselor," the host said. Apparently, he was too excited about Cinergy's insurance product to explain just how exactly this woman was a "health industry expert." And he skipped over the part where this sage just happened to have an office not too far from Cinergy's headquarters in suburban Miami. But maybe her proximity to Cinergy was more a matter of serendipity than convenience.
Fordin laid out the stark reality: People who are uninsured are more likely to delay or forego standard medical care, which jeopardizes their health in the long run.
"Being uninsured makes one more likely to be hospitalized for avoidable conditions, and of course the uninsured are least able to afford a hospital stay," Fordin said. And then if you're spending all your money on medical bills, she said, how can you afford food and housing? You might go bankrupt.
Cue the "actor portrayals" — Cinergy customers who are so happy they and their children can go to a doctor. They aren't eating dog food and they have a roof over their heads.
Then, nearly eight minutes into the spiel, The Man With No Name clarifies that this is "a limited medical plan" designed to meet "most of your routine and predictable needs." But it also covers 80 percent of the cost of surgery, and the premiums are about half of most major medical plans.
It was like he was speaking directly to Cathey, who picked up the phone and got herself a policy. Two weeks later, when she wound up at the hospital again, doctors found the tumor they had missed the first time around. She was pointed to MD Anderson, St. Luke's or Methodist. But everything was all right now, because she had her Cinergy card.
Or so she thought. She soon learned that covering surgical costs didn't mean much if your hospital costs aren't covered. She says Methodist didn't accept her insurance, and the other hospitals wanted thousands up front. Now she finally knew what that guy from the infomercial meant when he said "limited medical plan."
While some insurance industry watchdogs believe the narrow scope of limited insurance plans does not justify the premiums, the real problem appears to be not the plans themselves, but the way they're marketed.
Cinergy does not appear to be any better or worse than the many other marketers of limited insurance plans; its marketing strategy is just about the same. And it appears that this marketing is aimed at, or is especially appealing to, people who can't afford (or think they can't afford) health insurance. Like the rent-to-own or payday-loan industries, these types of insurance agencies seem to make their money off the most vulnerable segments of the population (see "Cover Me: Apply Heat").
And because most people believe that the best way to obtain a decent policy is through group insurance, insurance agencies like Cinergy say that the low cost of their policies is made possible through the buying power of certain consumer advocacy associations. However, these associations appear to only be marketing tools that create a patina of legitimacy; they are dummy corporations that only exist on paper, and seem to serve no other function than to offer a logo for an agency to slap on its Web site.
It makes consumers feel like they're part of an important association, like they belong to something. But the truth is, they're on their own.
Cinergy Health's CEO is Daniel Touizer, a 36-year-old Florida resident and Canadian citizen who believes that the federal government has not processed his application for U.S. citizenship in a timely fashion. So he's currently embroiled in a lawsuit against former acting U.S. Attorney General Peter Keisler, former Department of Homeland Security Secretary Michael Chertoff and former Director of the U.S. Citizenship and Immigration Services Director Emilio Gonzalez.
Touizer is no stranger to litigation. Between 2003, when he applied for citizenship, and 2008, when he filed the suit, Touizer failed to pay hundreds of thousands of dollars in back taxes and was slapped with liens by the Internal Revenue Service. (A Cinergy spokesman says Touizer ultimately paid all his back taxes and is clear of any IRS liens.)
Touizer appears to have first showed his entrepreneurial flair when in 2001 he gave up his job as vice president of a company that distributed public Internet kiosks and decided to form his own company, American Terminal, that did the same thing.
American Terminal ran into a snag in 2002, when the Florida Department of Agriculture and Consumer Services, assisting in a U.S. Federal Trade Commission sting of dozens of companies selling "business opportunities," fined Touizer's company $2,000. (No details were available regarding the nature of the fines.) Also, in disclosure paperwork American Terminal was required by law to provide potential investors, the "litigation history" section includes the following: "In August 2001, Daniel Touizer as managing member of American Terminal Corp, LLC, was assessed a $2,000 fine in an administrative action by the Florida Division of Consumer Services, for advertising prior to receiving approval.")
But those weren't the company's only problems: A New York company called Upstate Networks claimed to have patented the technology used in American Terminal's kiosks in 1996. The company notified Touizer of this alleged infringement in November 2001. Touizer didn't respond to it, and Upstate Networks filed suit. Touizer ignored the lawsuit as well.
Because Touizer did not mount any defense in the case, the judge found in favor of Upstate Networks and ordered American Terminal to pay $221,000.
But Touizer would soon move on to better things.
He created a company that would become Cinergy after a few name changes, which seem to have been predicated on the fact that, under its original name, the company allegedly failed to pay $108,000 to AT&T for phone services. Although the suit named Cinergy as well as HealthPlus Benefits — Cinergy's previous name — Touizer's lawyers responded by saying AT&T's contract was with HealthPlus, which was totally not Cinergy. The suit was ultimately settled out of court; when the Houston Press asked about the details of the agreement, Cinergy declined to comment.
Cinergy originally marketed discount medical plans and then added limited insurance coverage. However, the company now appears to act only as an insurance agent for limited insurance. Confident in this new brand, the company has issued a spate of press releases about its "dramatic growth" and hiring of a new medical director.
The releases contained contact information for Ronn Torossian, head of New York City-based 5W Public Relations. But when the Press called Torossian with some very basic questions about Cinergy, it led to a slew of legal threats and demands to "watch your words and actions very careful [sic]" and to let them review "said sources prior to publication."
Torossian ultimately brought in Cinergy's lawyers, who admonished the Press for failing to "confine" our questions to "subjects that are within scope of the legitimate and pertinent public discourse on health care in this country."
The Press's first affront to "public disclosure" came when we asked Torossian if Cinergy was an insurance agent or a provider of "medical discount" services. Torossian — who informed the Press that he's not the company's spokesman, he's only the guy reporters are supposed to call in order to arrange interviews — replied that Cinergy is a "health insurance solutions provider." To which we asked, "But is it insurance?"
Torossian then asked if he could address that question off the record. When the Press declined, based on the principle that asking a company what exactly it is they do is hardly grounds for Deep Throat-style confidentiality, Torossian became convinced this story would have a "political bent." (Apparently, Torossian comes from the school of public relations that believes instant evasiveness and legal threats are the best way to inform consumers and reporters about the specifics of your company's products.)
Torossian then reiterated that Cinergy provides health insurance solutions. Finally, he was able to secure a quote from a Cinergy executive who stated that Cinergy is a licensed insurance agent. Torossian then demanded that all subsequent correspondence be conducted solely via e-mail, a demand he disregarded only hours later when he called to talk more about "health care solutions."
We were surprised, since we figured Torossian would be happy to talk about the company he's been issuing press releases for, releases such as the one announcing the coup of landing Dr. Erika Schwartz as Cinergy's medical director.
Schwartz, a celebrity M.D. and best-selling author who makes the rounds on news and talk shows, was quoted in the press release as saying, "Cinergy Health is an insurance benefits company that actually puts the individual first. Its affordable health insurance coverage is as innovative as any medical breakthrough I've seen...As someone who's been involved in patients' rights for years, I am proud to be associated with this company."
Her confidence in Cinergy was remarkable, as the company has been selling limited insurance products for less than a year. Prior to that, it was what's called a DMPO — discount medical plan operator. These companies sell a package of noninsurance benefits that allow cardholders to receive discounts from doctors and pharmacies.
But maybe Schwartz thought Cinergy would be yet another platform for her to push "bio-identical hormones" — largely FDA-unregulated alternatives to drugs like Premarin, used for the treatment of menopausal symptoms. Bio-identical hormones, which have not been subjected to comprehensive clinical testing, have a tendency to appeal to the physicians, "holistic" practitioners and patients who believe in a government-American Medical Association-Big Pharma conspiracy to keep people sick and pump them with expensive, toxic prescription meds.
In 2008, Schwartz appeared on Houston doctor Steven Hotze's radio show, where she shared with the guest host her belief that, when she was growing up, breast cancer was virtually unheard of, and that it is one of many "diseases that have been created to serve the big drug [companies]."
As Cinergy proudly trumpeted in its announcement that Schwartz was joining its team, the good doctor co-founded the Bio-identical Hormone Initiative, which serves to enlighten people with a stubborn adherence to evidence-based medicine.
But Torossian was reluctant to elaborate on these press releases, like the one announcing Schwartz. Perhaps this reluctance to answer basic questions is indicative of the limited insurance/discount plan industry as a whole: You are not actually supposed to ask what it is you're buying. You're supposed to see the infomercial or the blast-fax or the sign on the side of the road, pick up the phone and give your credit card number. And you're definitely not supposed to look into the backgrounds of the people you're signing over your health and money to.
Because if you do that, you might find a business history, and that might make you think twice. It's much better for these companies if you just stick with whatever you're told on an infomercial. If not, you might be admonished by a lawyer. A lawyer like Matt Anthony, who represents Cinergy, and who wrote a letter to the Press stating, "A great potential for harm exists to the present and future business endeavors, professional and personal reputation of Mr. Daniel Touizer in the careless, let alone malicious dissemination of false information or innuendo."
But really, all we wanted to know was this: What is it exactly that Cinergy offers?
For that, Torossian referred us to the Web site, which outlines Cinergy's limited medical insurance plan, underwritten by American Medical and Life Insurance. These plans are meant to cover routine medical expenses. Cinergy's Preferred 1000 plan (which Cathey has) states that it covers among other things the following:
• Doctor visits: "100 percent up to $100 per visit up to five visits per person per year"
• Preventative tests: "covers 100 percent up to $100 per visit; one test per person per year"
• Emergency room: "covers 100 percent up to $100 per visit, one visit per person per year"
• Daily hospital confinement: "covers 100 percent up to $1,000 per day up to 30 days"
• Surgery benefit: "Pays 80 percent of Surgery (Medicare schedule); no annual limit."
While Cinergy's infomercial may not emphasize the limited nature of these policies, its Web site clearly does. Yet for some reason, Cathey believed she was buying comprehensive coverage. (Maybe she focused on the 100 percent part and never saw the up-to-$100-a-visit limit.)
In 2006, Cinergy became a member of the Dallas-based Consumer Health Alliance, which touts itself as the "national trade association of the discount healthcare industry." The Alliance claims to serve more than 28 million people through its member companies.
The Alliance was formed in 2002 and is proud of the fact that it established a code of conduct before state and federal regulators began regulating discount medical companies, which by 2004 were starting to attract a lot of heat; state authorities were bombarded with complaints that these companies were passing off their product as insurance. That code states in part that a "discount program operator must ensure that a discount healthcare program's advertising, solicitation, and marketing materials and practices do not utilize words and phrases in a manner or context that improperly implies the program is insurance, and are not otherwise deceptive, unfair, or misleading," and "a program operator must approve all advertising, solicitation, and marketing materials to be used by marketers and take steps to halt the use of unapproved advertising, solicitation and marketing materials by marketers."
The year that Cinergy joined the Alliance, Florida's Office of Insurance Regulation gained oversight of discount medical plan operators and promptly enacted some of the strongest oversight in the nation. Texas's Department of Licensing and Regulation gained oversight of discount medical operators in 2008, and a bill passed earlier this year will transfer oversight to the Texas Department of Insurance in 2010.
James Quiggle of the Coalition Against Insurance Fraud monitors the marketing of limited insurance and discount medical products.
"There are an estimated 45-50 million uninsured people in this country," he says. "Every one of them is a potential customer. That's a huge pool of legitimate business."
As Allen Erenbaum, counsel for the Consumer Health Alliance, points out, the caveat that applies to shopping for insurance applies to discount medical plans: "It's the same thing in the insurance world — people need to understand what they're getting and what they're not getting."
The caveat might apply to Alliance members as well: In 2006, when Cinergy joined the Alliance, the Florida Office of Insurance Regulation found that the company's agents used a form and "telephone scripts that contain language that is untruthful and misleading."
Cinergy entered into a consent order with the Florida office, a consent order that also stated Cinergy's:
• "Failure to refund all periodic charges to members that cancelled their membership in the discount medical plan organization within the first thirty days after the effective date of enrollment in the plan"
• "Failure to follow complaint procedures as filed with the office"
• "Failure to contain a Web site address on advertising materials."
Per the consent order, Cinergy waived a hearing and "all rights to challenge or to contest" the order, and also agreed to pay a $7,500 penalty and $3,000 in administrative costs.
But one of the more egregious acts by Alliance members, and one that states have had either difficulty or no interest in pursuing, is the creation of dummy corporations that exist solely to make limited insurance and discount plans available to their members — a practice that is illegal in some states. This tactic appears to have been drummed up to mirror the group buying power and lobbying clout of established organizations like AARP.
To wit: Cinergy makes its insurance possible through membership in something called the National Congress of Employers, which claims to have been incorporated in 1996 and exists to "advocate for policy changes, pilot programs and call upon politicians to create protections, services and benefits that people can rely on, regardless of how they make their living." Although the NCE claims to have offices in New York and Washington, D.C., neither jurisdiction's registered corporations database shows such an entity.
And while the NCE claims to advocate these policy changes via its political action committee, the Federal Elections Commission database shows that the PAC was only registered in March 2009 — a little late for the "key bills in Congress" the National Congress of Employers highlights on its Web site, the most recent of which are from 2004. (The PAC files monthly financial reports, which report that the PAC has never contributed, received, transferred, refunded, lent or disbursed a single dollar.)
An NCE representative originally agreed to get us some information about what it is the association actually does, but subsequent phone calls went unreturned. (According to its Web site, the NCE doesn't just make low insurance premiums possible — membership gives you a golden key to discounts on such things as movie tickets, flowers and amusement parks.)
Of course, the National Congress of Employers should not be confused with the National Congress of Employees, which has an identical logo and which also offers discount "healthcare" through a company with the same Irving address as dozens of other companies owned by Alliance HealthCard, a Consumer Health Alliance member.
The confusion is understandable, though. Here's the National Congress of Employers' origin statement:
The N.C.E. was formed in 1996 by former politicians, public servants, attorneys and business leaders to address the needs of micro-business through political advocacy and lobbying.
And here's the National Congress of Employees' origin statement:
The N.C.E. (National Congress of Employees) was formed in 1996 by former politicians, public servants, attorneys and business leaders as a national not-for-profit organization that represents the needs and concerns of America's growing small business workforce.
Conveniently, many of the other associations that offer discount healthcare to members are managed by the same company — National Association Consultants — in suburban St. Louis. This single address holds the charters for companies such as the Consumers Independent Association, United Consumer Awareness Association, America's Health Care Consumer Association, American Consumer Group, American Benefits Association, American Business Association and American Affinity Association.
Despite the fact that all these associations appear to do nothing between the consumer and the provider, and despite the fact that most are related to the Consumer Health Alliance, and despite the fact that they somehow all wound up in some guy's office in Missouri, no one at the Alliance has decided to pool their resources into one gigantic association with enough pull to offer major insurance, instead of limited plans which won't cover your hospital fees when a grape-sized tumor attacks your pancreas.
"One issue might be, there are certain benefits that are available under a group coverage situation that don't require individual underwriting," the Alliance's Erenbaum offers by way of explanation.
So this means all the allegedly disparate companies can only work with minor-league insurance companies who are only too happy to issue significantly limited policies.
For its part, Cinergy is an agent for and sells its customers the New York-based American Medical and Life Insurance and Illinois-based Guarantee Trust Life Insurance.
According to the Texas Department of Insurance Web site, which lists nationwide violations for all insurance companies licensed to do business in Texas, these Guarantee Trust violations include a $10,000 penalty for changing renewal dates on Medicare supplement policies in Wisconsin in 1993; a $25,000 penalty for modifying the "paid to" dates on supplement policies in Minnesota in 1993; a $10,000 advertisement violations penalty in Iowa in 1994; a $23,000 penalty for "policy violations" in Florida in 1996; and in 2004 a $5,000 penalty for "violations found in a target market conduct examination of [the] company's Medicare supplement insurance business in Maryland."
While most Cinergy policies appear to be underwritten by American Medical, a 2007 filing with the Florida Office of Insurance Regulation shows that Cinergy used to offer Guarantee Trust-underwritten policies via the United Consumer Awareness Association (which, of course, is registered in that Missouri office).
The current president of the United Consumer Awareness Association is Thomas Force, who was the CEO and general counsel of American Medical and Life until 2007. Force's Long Island address is also the address for a company called Patriot Health, which marketed wholesale noninsurance benefit plans customized by United Health Programs of America...which packaged discount plans for Patriot Health, which marketed the plans to Cinergy (back when Cinergy was still providing medical discounts) via membership in the United Consumer Awareness Association, which also offered a supplemental insurance product underwritten by Guarantee Trust Life.
Consumers shopping for limited medical insurance plans might want to pay attention to what M.D. Anderson spokeswoman Julie Penne told us when we asked about Kathern Cathey and Cinergy.
"Cinergy offers limited health insurance," Penne wrote in an e-mail. "While American Medical and Life is licensed by the Texas Department of Insurance, Cinergy does not appear to have such a listing. Some of Cinergy's plans may be underwritten by American Medical and Life, but M.D. Anderson is not obligated to accept any insurance that does not meet our requirements for coverage...Here's the bottom line: If we had accepted this patient under Cinergy, the patient would have had significant personal financial responsibility because of the limitations of her coverage. As such, M.D. Anderson asked for a deposit."
St. Luke's spokeswoman Jessica Michan could not confirm Cathey's story, but she indicated that, through the hospital's Patient Financial Assistance Program, "St. Luke's will provide partial or full financial assistance for medically necessary care in accordance with Texas law and hospital eligibility guidelines to patients who require hospital care or medical services, and cannot afford such care or services because of limitations in their health insurance or personal finances."
Which means that Cathey might have a shot at St. Luke's after all. In the meantime, she says, her only other hope is Ben Taub, which has a considerable waiting period.
She says she's tried to clarify her coverage information by calling Cinergy, but winds up in telephone hell.
It's always "hold please. Let me transfer you to this one, please," she says. And meanwhile, she says, "At night I can't sleep. I have to just prop myself up on pillows, take pain pills and just almost every night I have to cry myself to sleep because I'll be in so much pain."
If you didn't know Cathey before the cancer, you might think she looks fit. Her weight looks healthy. But then she'll refer to a photograph of her and some friends hanging on the wall in her living room, when she was 40 lbs. heavier and more likely to smile. She forces herself to eat — mostly light foods like popsicles and Jell-O cups.
"When I eat...sometimes it just feels like it's just hung here," she says, pointing at her throat. "It's choking me." She says a baby probably eats more than she does.
During her interview with the Press, she rocked back and forth in pain, alternating between clasping her arms over her stomach and cradling her head in her hands.
When the Press called the "member services" number on her Cinergy card, we couldn't get much further. When we asked for coverage information for the Cinergy Health Preferred Individual 1000 Plan (courtesy of the National Congress of Employers), we were routed to someone at American Medical and Life Insurance, who told us that Cathey should have a benefit booklet. But it appeared that Cathey misplaced the booklet some time ago, and she doesn't have Internet access at home, so downloading a new copy wasn't possible at the time.
The woman told us this was a matter for Cinergy, not American Medical. She gave us the phone number for Cinergy, which was the same phone number that led us to her. When we explained this, and the overall difficulty in determining her coverage, we were told, "Like I said, she should have a benefit booklet."
And she really should. Because then she might see her schedule of benefits, which clearly states that "Benefits provided are supplemental and not intended to cover all medical expenses. This is not a substitute for comprehensive health insurance." (A later call to American Medical got a more compassionate response: The Press spoke with Michael James, the company's general counsel, who expressed sympathy for Cathey's situation and said he would have her benefits booklet overnighted to her. He also said he would contact his company's claims department and review her policy to make absolutely sure she was receiving all the benefits she's entitled to).
It's stated much more clearly than it was by The Man With No Name in the Cinergy infomercial, but still, the infomercial met all regulatory disclosure requirements. Although Cinergy has been cited for a violation for misleading consumers in the past, this infomercial, and this product, are legally aboveboard. Although, despite what the infomercial implied about a major policy costing twice as much as limited coverage, a simple quote search on the Blue Cross/Blue Shield of Texas Web site indicates that Cathey might be eligible for a policy that would pay 80 percent of hospital fees — for $55 a month more than the $241 she's paying with Cinergy.
Or at least she was eligible. With a cancer diagnosis, major coverage for under $300 a month is pure fantasy.
Bottom line is this: Cinergy did its job as required by law. (As Torossian explained in an e-mail, "Our plans are designed to provide practical coverage for people on a limited budget — not to provide catastrophic coverage. Cinergy takes measure in the sales process, as well as in membership materials to ensure members understand the limitations of the plan.")
So that means the only thing killing Kathern Cathey — besides the cancer — is her inability to read the fine print.
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