Why health insurance isn't there when you need it most

Robin Beaton, a retired nurse from Waxahachie, Texas, was diagnosed with an aggressive form of breast cancer in 2008. Fortunately she had health insurance. Three days before she was scheduled for double mastectomy surgery, however, Blue Cross cancelled her insurance. The company claimed she had once seen a doctor for acne and hadn’t disclosed this on her insurance application.
Robin couldn’t have anticipated this. She didn’t know her dermatologist had written a word on her medical record that was misinterpreted by Blue Cross. The doctor immediately tried to intervene with the insurance company, but they wouldn’t budge. First they wanted a three-month review of the last five years of Robin’s medical history, and then they decided just to cancel.

It took the intervention of Texas Congressman Joe Barton to get Robin’s insurance reinstated. Her surgery was delayed four months, during which time her tumor grew from 2.3 cm to 7 cm. She needed complete removal of her lymph nodes, extensive chemotherapy, and her prospects for recovery are now much less optimistic than they might have been.

Insurers cancel policies to avoid paying high costs

A contract, such as an insurance policy, can be legally cancelled if either party conceals or misrepresents information. The practice is called rescission. In the health insurance industry, rescission has come to mean finding an excuse to cancel when the policy holder needs expensive treatment.
Recession happens only to those who purchase an individual health insurance plan. It doesn’t happen if you’re enrolled in a group plan through an employer.
Jennifer Horton works in the film industry in California, doing freelance and temporary work. She gave up a group insurance plan when she took a job on a movie, but she purchased an individual plan from Blue Cross. The first time she had a check up, Blue Cross cancelled her policy. They claimed she hadn’t disclosed “irregular menstruation” and use of a weight-loss drug.
It turned out a doctor had made a notation on Jennifer’s record about a vague, possible condition that she didn’t in fact have. Jennifer was completely unaware of this, so she couldn’t have disclosed it on her insurance application. For the rest of her life she will be unable to purchase insurance coverage: One of the questions on every application is whether coverage has ever been rescinded.
Rescission happens to be illegal in California, by the way, but that doesn’t stop the insurance industry.
One more example. Otto Raddatz’ policy was cancelled right after he was diagnosed with lymphoma. His insurance company, Fortis, claimed Raddatz had not disclosed a CT scan that showed gallstones. According his doctor, “I never discussed those issues with him; they were very minor.” The doctor had retired and couldn’t be located. It took the Illinois Attorney General’s office to locate the doctor, who was on a fishing trip. Meanwhile, Raddatz treatment – he was scheduled for a bone marrow transplant – was delayed.

How widespread is this practice?

The House Subcommittee on Oversight and Investigations held a hearing on rescission practices in the insurance industry on June 16. Robin Beaton, Jennifer Horton, and the sister of Otto Raddatz, who is now deceased, testified. So did executives representing the insurance industry.
Insurance companies claim rescission is rare and that they must vigilantly protect against fraud in order to keep costs down. The subcommittee investigation, however, found that the practice was widespread. Policies were cancelled even when discrepancies in health information were due to honest, unintentional mistakes; when the policy holder was not aware of the disputed information and so could not have disclosed it on an application; and when the information was totally unrelated to the condition that had prompted rescission.
How widespread is this practice? Insurance companies have saved over $300 million over the past five years by practicing rescission. Employees were praised in performance reviews for identifying information that could be used against a policy holder. The review of one employee, for example, noted that he had dropped thousands of policyholders and saved the company nearly $10 million in medical care. He received the highest possible rating.
The subcommittee determined that specific conditions were targeted for rescission: breast cancer, lymphoma, pregnancy, high blood pressure, and more than 1,400 other conditions.

The insurance industry and health care reform

Both Democrats and Republicans on the subcommittee were appalled by what they learned. According to the Los Angeles Times:

Late in the hearing, Stupak, the committee chairman, put the [insurance] 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.”

Insurance executives are responble to their stockholders, not their policy holders. If they had said yes, their stock might have declined.

“This is precisely why we need a public option,” [Congressman John] Dingell said.
“When insurance companies go under oath and admit they are canceling innocent patients when they get sick, it makes it very difficult for lawmakers to pass a law that requires every American to buy a policy or face a tax fine. It opens the way for a public option to hold the companies in check.”

Universal coverage, which is favored by the insurance industry because there would be more people buying insurance, could also help. From the insurance industry point of view, if everyone had insurance, then people wouldn’t wait until they got sick to apply for insurance. Insurers would presumably worry less about whether an applicant was telling the truth.

An excerpt from Robin Beaton’s testimony

You can read the witnesses’ statements online, but watching them tell their story is very moving. Here’s an excerpt from Robin Beaton’s testimony.

Sources:

(Links will open in a separate window or tab.)

Joanne Silberner, Insurers Revoke Policies To Avoid Paying High Costs, National Public Radio, June 22, 2009
Karen Tumulty, When Health Insurance Isn’t Health Insurance, Time, June 16, 2009
Lisa Girion, Health insurers refuse to limit rescission of coverage, Los Angeles Times, June 17, 2009