November 11, 2007 - Insurance Sleaze

I just ran across this article, which is the ultimate in sleazy insurance company practices. I’ll begin by quoting an excerpt...



“HEALTH INSURER TIED BONUSES TO DROPPING SICK POLICYHOLDERS
By Lisa Girion
Los Angeles Times Staff Writer

November 9, 2007

One of the state's largest health insurers set goals and paid bonuses based in part on how many individual policyholders were dropped and how much money was saved.

Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.

The revelation that the health plan had cancellation goals and bonuses comes amid a storm of controversy over the industry-wide but long-hidden practice of rescinding coverage after expensive medical treatments have been authorized.

These cancellations have been the recent focus of intense scrutiny by lawmakers, state regulators and consumer advocates. Although these ‘rescissions’ are only a small portion of the companies' overall business, they typically leave sick patients with crushing medical bills and no way to obtain needed treatment.”

And who is the patient who lost her coverage? Her name is Patsy Bates. She’s a hairdresser. Health Net cancelled her in the middle of her chemotherapy treatments for breast cancer.

Their reason? On her application for insurance, she had understated her weight by 35 pounds, and neglected to mention that she had once been screened for a possible heart condition, after having taken the now-discredited diet pill, Fen-Phen.

Insurance companies are within their rights in rescinding policies, if they can prove an application was fraudulent because it misstated or omitted vital health information. Yet, there’s a considerable gray area in many of these cases. Did the patient intend to mislead, or was it an innocent oversight? Was the omitted information really significant enough that it would have led the company’s underwriters to deny the application?

The company seems aware of how explosive the details of this case are:

“Health Net had sought to keep the documents secret even after it was forced to produce them for the hearing, arguing that they contained proprietary information and could embarrass the company.”

Embarrassing? I'd say that’s an understatement. Isn’t this sort of thing illegal?

Indeed it is. According to the LA Times, California law does prohibit insurance companies from paying bonuses to their claims reviewers, based on how many claims they deny. The company’s lawyer is claiming, in defense, that the employee in question is not a claims reviewer, but an underwriter.

Yeah, right. I’ll bet the company pays the lawyer big bucks to parse the English language – just like they paid their “underwriter” big bucks to snatch away medical coverage from a cancer patient in the middle of her chemotherapy.

Here’s how the cancellation came down, for this particular patient:

“Bates, 51, said the first notice she had that something was awry with her coverage came while she was in the hospital preparing for lump-removal surgery.

She said an administrator came to her room and told her the surgery, scheduled for early the next day, had been canceled because the hospital learned she had insurance problems. Health Net allowed the surgery to go forward only after Bates’ daughter authorized the insurance company to charge three months of premiums in advance to her debit card, Bates alleged. Her coverage was canceled after she began post-surgical chemotherapy threatments.

‘I’ve got cancer, and I could die,’ she said in a recent interview. Health Net ‘walked away from the agreement. They don’t care.’”

Memo to Governor Schwarzenegger: you were once the Terminator, right? How about terminating Health Net’s license to sell insurance in California? Given what this patient, and others like her, have suffered at these pirates’ hands, it seems the least you can do.

It’s like I’ve been saying all along: it’s a jungle out there, in the world of medical insurance. And a jungle’s not an especially healthy place to be – for people with cancer, or for anyone else.