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Insurers Dropping Patients Should Think Twice

UPDATE:

On April 17, California’s Department of Managed Health Care announced the state’s most assertive stance yet on policy recission: that an independent arbiter will review and hold accountable the state’s 5 major insurers for its past 4 years of canceled policies. Thousands of people will have a chance to win back their coverage and be reimbursed by the insurers for outstanding medical bills if they were deemed to have had their coverage wrongly rescinded.

Originally posted March 17, 2008:

Some say that the fundamental problem with U.S. health care is that the people with the authority to decide who gets what treatment are the same ones who profit from denying that care. “The last person on earth that should be making a determination…is the person that’s going to be making money off of the decision,” says Steffie Woolhandler, Associate Professor of Medicine at Harvard University.

While others may disagree and think the pursuit of profit has a clear role to play in the provision of health care, they can’t deny that this is in fact what happens. Especially not after one of California’s biggest insurers admitted in November 2007 of tying employee bonuses to rescinding patient coverage – rescission.

Health Net Inc. avoided paying $35.5 million in medical expenses by dropping about 1,600 policy holders between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations a bonus of more than $20,000. On average, she had exceeded her monthly targets of 15 coverage cancellations a month by more than 50%. All this would have remained hidden were it not for a lawsuit.

In an unprecedented ruling, on February 25 a judge has determined that Health Net acted in “bad faith” and must award a plaintiff $8.4 million in punitive damages and $750,000 for emotional distress for canceling her coverage. After hairdresser Patsy Bates was diagnosed with breast cancer, the insurer decided her health care expenses were eating into their profits and dropped her.

Now in addition to her settlement the company must pay off the $129,000 she has owed in medical bills since 2004. (Her cancer treatments were subsequently covered by a government program.) Health Net has decided to freeze its policy cancellations pending further review and other insurers are taking note. The settlement came just a few days after an attorney for the city of Los Angeles filed a lawsuit against the insurer for its policy termination practices.

Also in mid-February, regulators announced they were investigating California’s largest for-profit insurer, Blue Cross, for sending letters to doctors asking them to report back on patient conditions that could be used to cancel a new health care membership.

  • Legal? To be determined. Blue Cross claims they have used this method for years to suss out enrollee fraud and says any opposition is news to them.
  • Ethical? Doctors say not – that this underwriting of enrollees (acceptance of liability) is the insurers job, not theirs. “We’re outraged that they are asking doctors to violate the sacred trust of patients to rat them out for medical information that patients would expect their doctors to handle with the utmost secrecy and confidentiality,” said Dr. Richard Frankenstein, president of the California Medical Association.

Amidst the mounting pressure, Blue Cross announced on February 12 it would stop sending these letters.

On February 14, a college student filed suit against Blue Shield, demanding not monetary awards for the consequences of lost coverage but that the insurer stop the practice of rescission altogether. Meanwhile, California Insurance Commissioner Steve Poizner had just announced that his office was reviewing Blue Shield’s practices and was prepared to take action if it found problems.

In a February 23 new release, California Blue Cross announced it would be stopping its policy of rescission. The Los Angeles city attorney’s office has asked for proof the insurer is indeed doing so and has expanded its probe of patient policy cancellations to include the company. As of that time, Blue Cross was still fighting a $1-million fine the state Department of Managed Health Care had imposed in early 2007 for coverage cancellation.

For more on this:

INSURERS FEEL BACKLASH OVER POLICY CANCELLATIONS
by Amy Lynn Sorrel
AMNews
March 17, 2008.

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