Health insurance insider speaks out

Source: Cheap health insurance services in India

Wendell Potter, a former executive at health insurance giant Cigna, was one of three health care specialists who testified today before the Senate Commerce Committee. You can read the entire transcript of his testimony at The New Republic.
Potter began by identifying himself as an insider who had witnessed for-profit insurance companies in pursuit of their primary goal: Satisfying investors. Their strategy for accomplishing this goal includes deliberately confusing customers and “dumping the sick.”

Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand — or even to obtain — information we need.

After describing the unfulfilled promises the insurance industry made to President Clinton in 1993, he gives this update.

In the 15 years since insurance companies killed the Clinton plan, the industry has consolidated to the point that it is now dominated by a cartel of large for-profit insurers. The average family doesn’t understand how Wall Street’s dictates determine whether they will be offered coverage, whether they can keep it, and how much they’ll be charged for it. … The top priority of for-profit companies is to drive up the value of their stock.
To help meet Wall Street’s relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick. Insurers have several ways to cull the sick from their rolls. One is policy rescission. They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment. …
They also dump small businesses whose employees’ medical claims exceed what insurance underwriters expected. All it takes is one illness or accident. … The practice is known in the industry as purging. The purging of less profitable accounts through intentionally unrealistic rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent to 38 percent since 1993. …
Notices that insurers are required to send to policyholders — those explanation-of-benefit documents that are supposed to explain how the insurance company calculated its payments to providers and how much is left for the policyholder to pay — are notoriously incomprehensible. Insurers know that policyholders are so baffled by those notices they usually just ignore them or throw them away. And that’s exactly the point. If they were more understandable, more consumers might realize that they are being ripped off. …
The industry and its backers are using fear tactics, as they did in 1994, to tar a transparent, publicly-accountable health care option as a government-run system. But what we have today … is a Wall Street-run system that has proven itself an untrustworthy partner to its customers, to the doctors and hospitals who deliver care, and to the state and federal governments that attempt to regulate it.

For the story of why Wendell Potter made the transition from insurance executive to insurance industry critic, see the next post, A health insurance executive changes sides.