Insurance, Bill Pay Services May Not Mix

Like most Americans, I'm paying close attention to the health care debate and I have long had a great deal of sympathy for those who are uninsured. But because of a technology glitch, my sympathy has turned to empathy. Without knowing it, my family was recently uninsured for more than a month at a time we very much needed coverage.

Fortunately, there was a happy ending. But the saga led to an extremely stressful week during which we didn't know if the bills for a family member's health crisis - which included two hospital stays, an operation and countless office visits and tests - would be covered. We not only worried about being on the hook for tens of thousands of dollars but also wondered whether we'd be uninsurable.

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Here's what happened.

For many years, I have used Paytrust to pay most of my bills. Like the free bill-paying services from banks, Paytrust will make monthly mortgage or car payments. But Paytrust, which costs $9.95 a month, does something even better. You can have your bills sent directly to them and they will scan them and pay them for you.

You can program Paytrust to take care of the full amount or minimum payment, or just have it send you an e-mail so that you can pay the bill manually. The system has worked well over the years with very few glitches. Once or twice I've missed a credit card payment but the only consequence was having to pay a bit of interest or a late fee.

I programmed Paytrust to pay the full balance of our health insurance bill when it arrives. So instead of sending bills to our home, the insurance company sends them to Paytrust's payment processing center in South Dakota. Since we're billed quarterly, it was set for every three months. What I didn't know about that "feature" is that if more than one bill arrives during the three-month period, Paytrust will not pay the additional bills. For some reason, two bills did arrive in one quarter, and the second one wasn't paid.

The insurer sent follow-up notices, including at least two cancellation warnings. But instead of sending them to our house, they sent them to Paytrust. I didn't see them until my wife logged on to the insurance company's web site to check a claim status, only to find out it was denied because our policy had lapsed.

To be fair, Paytrust does scan and post all notices and sends an e-mail if a notice has been posted. But I get lots of those e-mails from Paytrust, most of which aren't important. Had I logged on and looked carefully, I would have seen the cancellation notices.

Knowing what I now know about Paytrust's system, a safer way to make sure these bills are always paid is to configure the settings so that it no longer expects bills every three months. This way the service will pay every bill, regardless of how many it receives.

An even safer option is to not use Paytrust for health insurance and have insurer automatically deduct the payment from my checking account or charge it to a credit card. That way, all I have to do is make sure I have enough money in my checking account or enough credit on my card.

Still, I think there are things that bill-paying services and insurance companies can do to help customers avoid problems like this. It would be good if Paytrust could enhance its software to recognize cancellation notices or any other notice from insurance companies to flag them and notify a customer.

And insurance companies should be required to send cancellation notices by certified mail to a customer's home address. It would also be nice if they would call customers who are late, the way credit card companies routinely do for overdue balances.

It looked for a while as if we might have passed the final cancellation date, which would have meant that the insurance company wouldn't have paid recent or future claims. And we might have had trouble getting new insurance. But we contacted the company just in time to qualify for reinstatement.

Even that was a bit more stressful than it should have been. It was just our luck that when we asked for reinstatement, the company was having computer system problems of its own, which wound up delaying reinstatement by nearly a week.

So thanks to a bit of luck and good timing, all is well. But the experience was harrowing. The other good news is that my family member is recovering nicely.

This article is adapted from one that first appeared in the San Jose Mercury News