Wednesday, June 17, 2009

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.

"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."
For those of you not versed in the details of medical underwriting, let me explain a few things.

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?
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