Congress finds health insurance industry fundamentally flawed

Source: Hogue News

After a year investigating practices of the health insurance industry, a Congressional committee chaired by Representative Henry Waxman concluded that the system is “fundamentally flawed.” Regulations governing insurance are a mishmash of state and federal laws. The insurance industry takes advantage of inconsistencies to engage in “controversial practices.”
According to the federal HIPAA law (Health Insurance Portability and Accountability Act), insurance companies cannot rescind (cancel) a policy unless there has been fraud or intentional misrepresentation. But insurance companies cancel health insurance even when policy holders have done something by accident or unintentionally. (See yesterday’s post: Why health insurance isn’t there when you need it most)

Here’s part of the executive summary from the Energy and Commerce committee’s June 16 memorandum:

• Insurance companies rescind coverage even when discrepancies are unintentional or caused by others. In one case reviewed by the Committee, a WellPoint subsidiary rescinded coverage for a patient in Virginia whose insurance agent entered his weight incorrectly on his application and failed to return it to him for review. The company’s Associate General Counsel warned that the agent’s actions were “not acceptable” and recommended against rescission, but she was overruled.
• Insurance companies rescind coverage for conditions that are unknown to policyholders. In 2004, Fortis Health, now known as Assurant, rescinded coverage for a policyholder with lymphoma, denying him chemotherapy and a life-saving stem cell transplant. The company located a CT scan taken five years earlier that identified silent gall stones and an asymptomatic abdominal aortic aneurysm, but the policyholder’s doctor never informed him of these conditions. After direct intervention from the Illinois Attorney General’s Office, the individual’s policy was reinstated.
• Insurance companies rescind coverage for discrepancies unrelated to the medical conditions for which patients seek medical care. In November 2006, a Texas resident with a policy from WellPoint was diagnosed with a lump in her breast. The company initiated an investigation into the patient’s medical history and concluded that she failed to disclose that she had been diagnosed previously with osteoporosis and bone density loss. The company rescinded her policy and refused to pay for medical care for the lump in her breast.
• Insurance companies rescind coverage for family members who were not involved in misrepresentations. When a UnitedHealth subsidiary determined in 2007 that a policyholder in Michigan failed to disclose his abnormal blood count and other conditions, the company also rescinded coverage for his spouse and two children. When his spouse called to find out “[w]hy we dropped whole family instead of husband,” the company official “[c]alled her back [and] told her coverage was voided [due] to medical history not on app.”
• Insurance companies automatically investigate medical histories for all policyholders with certain conditions. WellPoint and Assurant informed the Committee that they automatically investigate the medical records of every policyholder with certain conditions, including leukemia, ovarian cancer, brain cancer, and even becoming pregnant with twins. UnitedHealth was unable to explain specifically how its investigations are triggered, claiming that it utilized a computer program so complex that no single individual in the company could explain it.
• Insurance companies have evaluated employee performance based on the amount of money their employees saved the company through rescissions. The Committee obtained an annual performance evaluation of the Director of Group Underwriting at WellPoint. Under “results achieved” for meeting financial “targets” and improving financial “stability,” the review stated that this official obtained “Retro savings of $9,835,564” through rescissions. The official was awarded a perfect “5” for “exceptional performance.”

The 19-page memorandum (PDF) is fascinating to read, full of appalling examples of the insurance industry at its worst.
One encouraging conclusion: All three insurance company executives stated they would stop the practice of rescission if Congress mandated universal coverage in its health care reform legislation. And that is what Congress has done in its recently released bill: “All individuals would be required to get coverage, either through their employer or the [health care] exchange, or pay a penalty.”

Sick Around America

The Frontline documentary, Sick Around America, contains an informative segment on the practice of rescission. One example: an insurance applicant was asked if she had ever been mentally ill. She honestly believed she never had been, so she answered no. Once she submitted a claim, her policy was rescinded because she had taken Prozac for six months after the death of her father.
The documentary, which aired in March, is available online and as a DVD

Related Posts:
The Economist reviews Kaiser Permanente health care
Why we passed health care: WellPoint and breast cancer
Health insurance insider speaks out
Acne, allergy, and toe nail fungus make you uninsurable
Why health insurance isn’t there when you need it most
A health insurance executive changes sides
Your insurance industry at work