The Dumbest Thing I have Ever Seen a Health Insurance Company Do––And Three of Them Took Their Turn Doing It in Front of the United States Congress
And, I’ve been in the business for 37 years.
First, let me stipulate we really need a system of universal care where everyone gets to have insurance. But we don’t yet so certain rules are unavoidable until we do.
Here are a few separate clips from today's Los Angeles Times article, "Health Insurers Refuse to Limit Rescission of Coverage:"
"Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive.For those of you not versed in the details of medical underwriting, let me explain a few things.
"The hearing on the controversial action known as rescission, which has left thousands of Americans burdened with costly medical bills despite paying insurance premiums, began a day after President Obama outlined his proposals for revamping the nation's healthcare system."
"But they would not commit to limiting rescissions to only policyholders who intentionally lie or commit fraud to obtain coverage, a refusal that met with dismay from legislators on both sides of the political aisle."
"The executives -- Richard A. Collins, chief executive of UnitedHealth's Golden Rule Insurance Co.; Don Hamm, chief executive of Assurant Health and Brian Sassi, president of consumer business for WellPoint Inc., parent of Blue Cross of California -- were courteous and matter-of-fact in their testimony."
"The industry has tried very hard in this current effort not to be the bad guy, not to wear the black hat,' Begala said. 'The trouble is all that hard work and goodwill is at risk if in fact they are pursuing' such practices."
"But rescission victims testified that their policies were canceled for inadvertent omissions or honest mistakes about medical history on their applications. Rescission, they said, was about improving corporate profits rather than rooting out fraud."
"Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show 'intentional fraud."
"The answer from all three executives: 'No."
Lying on your health insurance application is fraud and you can lose your insurance when you intentionally do it to gain coverage. That is good policy and basic to contract law. An example would be someone who went to the doctor because of severe headaches, didn’t disclose it when applying for insurance, and a short time after getting coverage was diagnosed with a brain tumor. Common sense would tell you not to withhold such information—particularly when the application makes you attest that you have revealed all.
But sometimes people forget to put things down. Let’s say you went to the doctor for a back problem onetime five years ago, didn’t put it down, and were diagnosed with diabetes a few months after your health insurance became effective.
It would be an inadvertent and non-material misstatement to sign your health insurance application having promised you told all but left something, that in the end did not matter, off of it. It is always important to be thorough and honest in filling out a health insurance application but sometimes we forget things.
In all the years I worked for an insurer—from underwriter to COO—we never penalized anyone for an inadvertent and immaterial misstatement. I never knew of a competitor who did either.
Why would you? How could you sleep at night knowing you retroactively canceled (or rescinded) a sick person’s health insurance because of something that really didn’t matter?
Fast forward to the California rescission controversy. A number of health insurers have been doing just that. More, they continue to defend it even in the face of California Insurance Department fines and plenty of lawsuits.
Then, they do it right in the middle of a national health care debate the day after the President of the United States flew to Chicago and told the American Medical Association private health insurers should have to compete with a public health plan that could well run them out of the business if it ever passed.
So here they sat in front of a Congressional Committee and were asked if they would stop retroactively canceling sick people’s health insurance—not for real fraud but—for inadvertent non-material reasons.
Representatives of the three companies each took their turn and said, “No.”
Two things.
I’ve brought a lot of good folks into this industry over the years. People who still need this to work so they can pay for their kids’ college education and fund their retirement plans.
This is the kind of corporate leadership they have to rely upon so that this industry can continue?
The current health care debate turns on who can best make our system work. My sense is that it will take the genius of individual creativity to separate the 70% of this health care system that is the best in the world from the 30% that is waste. Who can do the best job on that? Government? The private sector?
I believe the private sector.
And, this is the leadership I have to defend?
July 2008 post:State of California "Fearful" of Enforcing $1 Million Fine Against Wellpoint/Anthem Blue Cross for "Illegal" Health Insurance Policy Rescissions
February 2008 post: Health Insurance Industry "Racing to Defuse a Growing Furor Over Retroactive Policy Cancellations"
December 2007 post: California Insurers Lose a Big Court Case In the Health Insurance Policy Rescission Controversy
November 2007 post: Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
March 2007 post: California Fines Wellpoint $1 Million for "Unfairly" Rescinding Health Insurance Polices--Was Wellpoint Fair or Not?
14 comments:
Yes, this is the leadership you are defending. They are vultures who prey on sick people. You've seen the debacle resulting from greed, shortsightedness, and deregulation on Wall Street. Why would you expect health insurance executives to behave any differently from financial executives? Private insurers helped create the health care crisis. Why would you expect them to suddenly shape up and fly right of their own volition? It's not going to happen. Ever.
I, too, have worked for a insurance company and served in an advocacy capacity in DC on health issues. I have touted the private sector as key to innovation and quality.
This kind of leadership makes it a much harder sell -- and threatens to overshadow the positives, not to mention embarrassing.
I have also been a Republican advocating fiscal responsibility...
Then watched as our folks ramped the deficit out of sight under President Bush (there wasn't even lip service to making Medicare Part D budget neutral).
Then, there is my belief in social conservatism and the importance of living a life that reflects the moral precepts of fidelity, family, and putting one's children and family above one's immediate gratification....
Now we get to contend with leadership from the likes of Senator Ensign, Craig, and Rep. Mark Foley.
It is enough to make you want to retreat to a cabin in the woods Robert!
Conspiracy theory: Are they just trying to force Congress' hand, adding fuel to the argument that we should have an individual mandate coupled with guarantee issue? Will their seemingly absurd responses cause Congress to react by passing such legislation more quickly...in time to make it effective for the Jan.1, 2010 open enrollment season? Perhaps I'm reaching to far to find logic in such an apparent display of irrationality.
If anyone is serious about providing access to everyone, companies should not be allowed to "cheery pick" only healthy participants. And, if there is no cherry picking, there is no need for individual undewriting (and the cost involved in doing it). If there is no individual underwriting, there is no need for, or basis for, ANY recision.
The practices of underwriting, pre-ex, and recission, especially for someone who has been in the system without a break in coverage, is contrary to access for all. I remember when the "blues" were lobbying against underwriting, "cherry picking" and recission. Now some of them are the biggest offenders of that idea.
If there is a way to make insurance accessible and affordable, the result is going to be less profit to an insurance company. United, Assurant and Wellpoint would much rather rescind coverage for inadvertent mistakes and let the public pick up the pieces. You didn't really think they would play fair now did you?!
Gail:
The irony in this whole thing is that Lisa Girion, the LA Times reporter that broke all of this, called me at the beginning a couple of years ago and asked my reaction.
I told her flat out that Wellpoint would never do what they were accused of doing because in my experience the quality players never cancel for inadvertent and non-material reasons.
Your question was, "You didn't really think they would play fair now did you?
I can remember when they did.
As long as we sell health care as a commodity like cars or toasters, then this behavior will continue. People change insurers or cycle on and off health insurance so frequently that there's no need to build customer loyalty. Even stable customers don't usually get much of a choice - most employers offer one option, take it or leave it. Why should insurers worry about alienating customers if they're pretty sure they won't be customers next year anyway?
Bob, your faith in the private market is admirable. In health care, though, the evidence is pretty overwhelming that market failure is predominant. What exactly needs to happen to demonstrate this more completely than it has already been demonstrated?
As for defending the morons who testified before Congress, the debacle in the financial and auto industries are ample proof that it doesn't take competence to get to a high position in management. It wasn't even a year ago that the Big 3 auto execs flew into DC on their private jets to beg for money. Even after that PR nightmare, insurance execs see no problem going before Congress and defending their clearly indefensible business model.
Stupidity? Hubris? Arrogance? Youe explain it. I can't. It seems clear to me, though, that continuing to put the health system in the hands of these people is moral and economic suicide.
Yesterday The Los Angeles Times reported on the committee's investigation which found that WellPoint's Blue Cross targeted individuals with more than 1,400 conditions, including breast cancer, lymphoma, pregnancy and high blood pressure. And the committee obtained documents that showed Blue Cross supervisors praised employees in performance reviews for rescinding policies. One employee received a perfect 5 for "exceptional performance" on an evaluation that noted the employee's role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.
In November 2007, The Times reported that insurer Health Net Inc. paid bonuses to employees based in part on their involvement in rescinding policies. According to internal corporate documents disclosed through litigation, Health Net saved $35 million over six years by rescinding policies.
This month regulations were proposed by the California Department of Insurance to set standards that insurers must meet before they issue a health insurance policy -- and before they can take coverage away. These include:
* Require insurers be "100% sure that an applicant knew the answer to a health history question and failed to provide it before considering rescinding that person";
* Require coverage application questions to be clear and unambiguous;
* Require insurers to make sure that applications are accurate and complete;
* Require insurance agents to attest to any assistance given to applicants;
* Encourage insurers to review electronic health records instead of using health history questionnaires in deciding whether to grant coverage;
* Bar secret rescission investigations;
* Require insurers to notify consumers who are under investigation for possible rescission and allow them to respond and clarify their applications; and
* Require insurers to share documentation used during a rescission investigation with the consumer.
Health care reform is everyone’s responsibility. The answer to the healthcare dilemma is in personal accountability on all fronts, the government, the insurers, the providers and the individual!! This is a tall order!!
Bob, I think you're missing a category. AFAICT, there are three possible categories of misrepresentation.
1) Cases where the insurer can prove that the customer intended to commit fraud. ("Intentional fraud")
2) Cases where the insurer can't prove that the customer intended to prove fraud, but where the omission was material. ("Material omissions.")
3) Cases where the insurer can't prove fraud, and the omission wasn't even material. ("Immaterial omissions.")
Stupak's question was whether the companies would agree to limit recissions to category 1 only, not categories 1 and 2.
From the company's POV, it can be really hard to prove fraud. Even when the medical file has an entry that shows the doctor knows of a condition, the patient can always say that he didn't understand it, or the doctor noted it in his chart and didn't tell him, or that he didn't really read the questions carefully, so he didn't know he had to disclose the doctor's visit, and he didn't think it was material, so he didn't report it. The doctor doesn't specifically remember the conversation, and probably doesn't want to assist in a fraud prosecution against her own patient.
Therefore, limiting recissions to provable fraud, as Stupak requested, would mean limiting recissions to cases where you could prove that a customer read and understood her own chart, presumably through testimony of family members or medical professionals. It would also require that you call everyone you rescind a liar.
Allowing the insurers to rescind for category 2 - where the customer omits material information - puts the burden on the customer to disclose her medical history. I know that it sucks when the customer innocently decides that it's not relevant that she went to the doctor last week or that she was taking medication until last month, but if that information is material -- i.e., if it would have resulted in a denial if the customer had disclosed it, can we really force the insurer to write a policy unless they can prove it was intentional.
My one defense is that California is not a typical individual insurance market as carriers have a lot of leeway with underwriting.
I am guessing that these carriers model is to not be rigorous with the underwriting screening and catch them on the back end when a significant claim is filed with a recission. Stopping the recissions could mean changing this practice. As a result, they would have to reject more applicants and lose market share if other carriers did not change. It's the prisoner's dilemma.
This race to the bottom with insurance companies has been a big problem. That could be why Wellpoint had to change their policy.
Deadhedge
Bob, it is difficult to believe that insurance companies are defending recissions that are not based on material misrepresentation. I have been in the industry for 34 years and none of the companies I have worked for have advocated supporting such a practice. It is truly a poor reflection on us that some have chosen to defend those actions.
D.Vaughan in S.C.
This just proves that having insurance does not necessarily mean you're going to get health care.
Bob,
They lied. The CEOs outright lied. They said they could not check earlier because of the expense and all the time it would take to check on applicants.
But they expect no one would know about MIB inc.
MIB was the Medical Information Bureau, a member organization which collects ALL medical information from insurance claims forms and every insurance applications, aggregates this info into the huge database. They also collect info from the motor vehicle divisions and info on avocations (hobbies). This included any diagnostic code even if the doctor miss coded, mis-diagnosed or if the symptom was a side effect of the treatment!
All insurance companies are members and all have immediate access to the database for any person they want to insure. MIB promotes this:
"MIB member companies rely on its Checking Service™ for the fast, secure aggregation and exchange of data to combat fraud, improve underwriting effectiveness and increase product line profitability, while ensuring fair pricing for all applicants."
So MIB is supposed to be used upfront. But you can't collect premiums if you reject them from the get go.
MIB also states:
"MIB's primary purpose is to protect our Member companies from proposed insureds who KNOWINGLY OR UNKNOWINGLY omit information about their insurability on their applications. When a person applies for an individually underwritten insurance policy, he or she is asked a number of questions that help to classify him or her as an insurance risk. In the case where an applicant either FORGETS to answer a question correctly or knowingly omits information on the application, MIB provides an alert to the company where the person has applied for insurance regarding information that may be relevant in the risk assessment process. MIB saves its Member companies an estimated $1 billion annually by enabling them to avoid fraudulent insurance applications and early claims." [My caps]
Go to MIB.com to see even more about how MIB proclaims it is "Where the insurance industry shares its intelligence."
At 60 there is no way I could recall every health ailment I have had and for which I had seen a Doctor? Was the time I had severe acne when I was ~35 relevant? It was from a side effect of a medication I had been taking and went away when I stopped taking it. I had never had acne as a teen so it wasn't innate for me. Yet if I didn't mention it on any health care, life, disability, long term care or any other policy of the Insurance Industry, I could face rescission.
There is no way I could fill out any such form completely at the present time or even 30 years ago.
MIB has been in existence since 1902 and in 1946 became all inclusive for all insurances. You can not escape it.
Unfortunately, the trove of data does not seem to be available for scientific research – or for any beneficial purpose, except saving billions for the insurance industry.
Sam D, as far as I can tell, MIB is fairly incomplete. If my googling is accurate,
1) It only has records on 15 million Americans and Canadians.
2) It only stores insurance applications. So if you apply to Aetna in 2003, are diagnosed with something in 2005, and apply to Humana in 2009, then all MIB can tell Humana is whether the information on the 2009 application contradicts the 2003 application, and even that assumes that you are one of the relatively small number of people in the database.
MIB lets you pull your own record, so I guess we could check what they've got.
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