Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
It's hard to imagine a worse headline for the health insurance industry just as we are heading into what will be a fundamental debate over who should run our health care system.
It is even harder to imagine a dumber thing for the insurance industry to do than continue to argue and litigate the notion that an insurer can cancel--or rescind--an insurance policy for a misstatement of fact on an application for coverage no matter whether that statement was intentional or material.
Lisa Girion, of the Los Angeles Times had another story about insurance company health policy rescision last week and reported that:
- "Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed."
- The Times reported that in 2002, the company's goal for its senior analyst in charge of rescission reviews, was 15 cancellations a month. She did better than that, rescinding 275 policies that year for a monthly average of 22.9.
- Health Net's lawyer told an arbitrator that prohibitions against performance bonuses for rescision didn't apply because the bonuses were based on the overall performance of the analyst and the company. He also said that meeting the cancellation target was only a small part of her bonus payment.
- Health Net is also reportedly arguing that a prohibition against incentive compensation for rescisions does not apply to the insurer in the case because the senior analyst was an underwriter -- not a claims payer.
The problem is that some California health insurance companies have been looking for any "misrepresentation" on a policy no matter how unintentional or immaterial and then using it to cancel coverage.
In this case, a women who later contracted breast cancer was canceled because the insurer argued she had misstated her weight on the application and had not disclosed a heart condition. The women argued she provided all details to the agent who took down her medical history on her application.
Why the industry continues to push this issue is unfathomable to me.
Update
November 16 Post: HealthNet fined $1 million for "failure to be truthful" to state investigators. California Policy Cancellation Scandal Heats Up as Republican Candidates Propose Health Reform Based On An Individual Health Insurance System
7 comments:
Maybe because you are looking at the issue on a policy scale basis and the carrier is looking at it on a strictly short term, quarterly basis.
The betting line is that the carriers have 8 quarters to go before the game is over.
Hilary Fox Cooke
This is why it scares the $&%* out of me when I hear politicians clamoring for Mandated Individual coverage as Senator Ron Wyden has; along with others. Individual coverage lacks the consumer protection mechanisms like HIPPA and ERISA, plus States DOI (at least my state) are far too lax on these carriers. I mean, with these individual policies (State approved mind you) the consumer has virtually no administrative or regulatory recourse. The only option is to sue, and not everyone has those resources.
So, we have an instance of a single specific regional carrier engaging in questionable practices and you paint this as an industry practice. Very disengenuous. I just reviewed a couple policy certificates that was on my desk. The first from a CA insurer, second from TX, and they state:
Coverage may be terminated if knowingly false information is provided or meaningful fact is misrepresented on the signed enrollment form... Termination for fraud or intentional misrepresentation of a material fact does not include factors related to health status.
Here is TX from a different carrier:
Intentional fraud or misrepresentation of a material fact, or because the Subscriber knowingly
gave us false material information. Examples include false information relating to another
person's eligibility or status as a Dependent. During the first two years the Policy is in effect,
we have the right to demand that you pay back all Benefits we paid to you, or paid in your
name, during the time you were incorrectly covered under the Policy. After the first two years,
we can only demand that you pay back these Benefits if the written application contained a
fraudulent misstatement. If your coverage ends for this reason, we will provide you 15 days
prior written notice.
Those sound pretty fair and they are the first two certs I grabbed. Different carriers, different parts of the country. Maybe it is time to toss that wide brush you are using.
I really wish it was a matter of only my "wide brush."
Check out some earlier posts:
California Fines Wellpoint $1 Million for "Unfairly" Rescinding Health Insurance Polices--Was Wellpoint Fair or Not?: http://healthpolicyandmarket.blogspot.com/2007/03/california-fines-wellpoint-1-million.html
LA Times: Kaiser chose to work out new guidelines after paying a $100,000 fine and "Blue Cross of California, Blue Shield of California and other insurers maintain that they can cancel coverage based on any omission from an application, even if the omission is inadvertent." http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=41910n
OK, so let's see that is HealthNet, Kaiser (who at least is trying to constructively solve the problem), Wellpoint/Blue Cross, and Blue Shield.
All of this even after all of the bad publicity, fines, and regulators focus on ending it.
The problem isn't my "brush."
Well, it looks like I owe you an apology. I have never heard of a state allowing this or a carrier pursuing this course of action. It seems pretty self-destructive. With hat in hand I apolgize. I will review the other certs I have as well. Is there evidence of this outside CA?
No problem--we learn from each other. Most of the problems seem concentrated in Calif but that could be because of a more aggressive trial lawyer there. These are national companies so it is likely their procedures are similar elsewhere.
A USAToday article mentioned some other investigations: http://www.usatoday.com/printedition/news/20070129/1a_cover29.art.htm
I read the USAtoday article and something hit me. Two key plans being investigated. BCBS of CA and Assurant. I'll give a "Praise Jesus" to the first one who knows the connection. There is also another carrier that has had suspect practices that fits in to the puzzle as well, but not in this specific instance.
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