Editore"s Note
Tilting at Windmills

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November 9, 2007
By: Kevin Drum

RECISSIONS....Remember that scene in SiCKO where Michael Moore talks to a former healthcare insurance worker about the way insurance companies look for excuses to deny coverage after one of their customers gets sick and files a claim? It's called "recission," and apparently an arbitration judge in LA saw the movie too:

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.

....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. But....at a hearing on the motion, the judge said, "This clearly involves very significant public interest, and my view is the arbitration proceedings should not be confidential."

The documents show that in 2002, the company's goal for Barbara Fowler, Health Net's senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year — a monthly average of 22.9.

More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a "banner year" for Fowler because the company avoided about "$6 million in unnecessary health care expenses" through her rescission of 301 policies — one more than her performance goal.

In 2005, her goal was to save Health Net at least $6.5 million. Through nearly 300 rescissions, Fowler ended up saving an estimated $7 million, prompting her supervisor to write: "Barbara's successful execution of her job responsibilities have been vital to the profitability" of individual and family policies.

Italics mine. It's worth pointing out that Health Net is neither unique nor evil. If healthcare is provided on an individual basis in a free market, this kind of behavior is inevitable. The only way to avoid it is to provide health insurance on a group basis regardless of past history, and the bigger the group the better since it spreads the risk more evenly. It's one of many arguments in favor of national healthcare.

Want to learn more? Enter our drawing for a free copy of the SiCKO DVD! Just click here.

Kevin Drum 12:00 PM Permalink | Trackbacks | Comments (42)

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Comments

For the life of me, I do NOT understand why Democrats are not running FULL TIME on a campaign of outrage against FINANCIAL INSTITUTIONS, INSURANCE COMPANIES and TELEPHONE COMPANIES. OH, wait a min - I forgot the OUTRAGEOUS and TERRIBLE CREDIT CARD companies.

Posted by: POed Lib on November 9, 2007 at 12:10 PM | PERMALINK
Remember that scene in SiCKO where Michael Moore talks to a former healthcare insurance worker about the way insurance companies look for excuses to deny coverage after one of their customers gets sick and files a claim?No.

But I will once you guys give me my free DVD (yes, I signed up).

:-)

Posted by: Mark D on November 9, 2007 at 12:10 PM | PERMALINK

Barbara Fowler - The early morning front runner for Olbermann's Worst Person in the World.

And, Kevin, could you please define, "evil"?

Posted by: bert on November 9, 2007 at 12:12 PM | PERMALINK

It's worth pointing out that Health Net is not uniquely evil.

Fixed.

Posted by: Gregory on November 9, 2007 at 12:12 PM | PERMALINK

Yes, good arguments for why we need something better. What I wonder is, how can this crap be legal? (Or if it isn't, how do they get away with it?) It seems to violate basic rules of contract law - do the companies hide behind inherently vague principles and language, did scummy helpers in Congress explicity word law to their benefit, etc?

Posted by: Neil B. on November 9, 2007 at 12:12 PM | PERMALINK

Access to quality health care is valuable if I have it, but it's only really valuable if I have it and someone else does not.

Posted by: Homo Oeconomicus on November 9, 2007 at 12:14 PM | PERMALINK

"Recission" must be akin to some mobster whacking someone and saying, very politely, "Nothing personal, just business"

Posted by: bert on November 9, 2007 at 12:16 PM | PERMALINK

It's worth pointing out that Health Net is neither unique nor evil.

AG Mukasey thinks so, too, and he will do his best to use the awesome power of the Justice Dept. to remove that activist judge, even though he probably has no jurisdiction to do so.

Posted by: Brojo on November 9, 2007 at 12:16 PM | PERMALINK

The market works!!

Posted by: Gore/Edwards 08 on November 9, 2007 at 12:17 PM | PERMALINK

"It's worth pointing out that Health Net is neither unique nor evil."

Kevin, it is worth pointing out that you may have a different definition for evil than the average, thoughtful, human being.

Posted by: * on November 9, 2007 at 12:25 PM | PERMALINK

It's called "recission"

Actually, it's called rescission.

You might have it confused with the Bush recession. An understandable mistake.

Posted by: Roger Ailes on November 9, 2007 at 12:27 PM | PERMALINK

"For the life of me, I do NOT understand why Democrats are not running FULL TIME on a campaign. . ."

Two words: campaign contributions.
or
One word: cowardice.

Posted by: F. Frederson on November 9, 2007 at 12:35 PM | PERMALINK

Neil - I'm sure that the insurance companies point to some language in the policies on which to base the rescissions and the customer has to fight like hell or file suit to get coverage. Even if they don't rely on policy language, the customer is still in the position of being required to file suit to get coverage.

Legal or not, they get away with it if the customer doesn't fight.

Posted by: Dungheap on November 9, 2007 at 12:37 PM | PERMALINK

What ought to happen now (with legal help), is for a whole lot of folks to start turning over rocks and suing the shit out of these companies. If you get enough exposure with that-people will want UHC overwhelmingly and the MSM won't be able to ignore it. It would be kind of nice if a group of well-intentioned lawyers would get together and get this rolling. It also wouldn't be bad for more of these "former insurance workers" to come out and speak about what goes on.

Posted by: Doc at the Radar Station on November 9, 2007 at 12:37 PM | PERMALINK

I wonder what would happen if you could get everyone to start cancelling there health insurance,Would the Insurance Ind. even Flinch.

Posted by: john john on November 9, 2007 at 12:38 PM | PERMALINK

Sorry, it's just ridiculous to suggest this is not evil. Just because it's sanctioned by the system does not change the fact that it is tantamount to murder. There's just no use being mealy-mouthed about it--and that's one of the problems democrats chronically have.

There's no backlash and no media pressure when right-wingers blare extreme statements that aren't even true; but the reality has gotten so beyond the pale that when business men commit murder you can't say it out loud or you're perceived as being fringe. Yet pretending that these things are not evil and that we have a "balanced" view of them gives democrats no advantage, it just earns more contempt. And no matter what anyone says, and no matter what wrongs the rightist elite commit, a critical mass of white working poor seem to go on voting for them. All a right-winger has to do is say a little catch phrase like "class war" and the press will run it over and over again and jam it across the lower thirds, and the American public will dutifully submit. "Socialized medicine." "Class war." "Undermining the troops." They don't need genius sociologists and "framing" analysts and spin "experts" to come up with these bromides. Middle America is just waiting to eat them up. The wingers could run their game sleeping, while the left has to move mountains and do everything right to make one step forward, *even* when the Republican party and the president are at all-time lows in the polls. Is this ever going to swing back toward the center?

Posted by: q on November 9, 2007 at 12:39 PM | PERMALINK

This reminds me of casinos.

You pay to play but if you win too much your blackballed and kicked out.

They should call this rescission or recission Vegascission.

Posted by: Ya Know.... on November 9, 2007 at 12:44 PM | PERMALINK

"...Health Net is neither unique nor evil."

Well, you're half right...

Posted by: Winston Smith on November 9, 2007 at 12:46 PM | PERMALINK

It's actually an interesting point that HealthNet, like any other insurance company, is simply operating in its rational self-interest here, precisely as the market demands.

I guess this makes me wonder what the Libertarian response is to this problem. How can they get around the consequence that in the laissez faire system they idolize, a logical consequence is that the sick are essentially punished by the market, perhaps into ruin, for their sickness?

Can any Libertarians provide an answer?

Posted by: frankly0 on November 9, 2007 at 12:55 PM | PERMALINK

I think it is pretty funny that this woman only got $20,000 for saving the company $7 million.

Posted by: Bruce Bartlett on November 9, 2007 at 1:00 PM | PERMALINK

Well, it's a tendentious use of 'rational.' Rational from the point of someone evil enough to put self-interest above obligation: er, yeah.

So: rational in the same sense that it's rational for me to kill kindly old Mrs. Smith and steal her Social Security check if I can get away with it.

I just think it's important to remind ourselves of this from time to time in these discussions about the rationality of the market. We're using 'rationality' in a very, very narrow and controversial sense.

Posted by: Winston Smith on November 9, 2007 at 1:00 PM | PERMALINK

Imagine an auto repair business that hired a middleman to conceal obvious car problems from the owner, so they wouldn't have to fix them.

Absurd, isn't it? So is the United States current -ahem- health insurance structure.

Can someone tell me why we ever let insurance companies come between the doctor and the patient? What value do they add? Why can't a patient deal directly with the doctor or his business manager? Who thought of the idea to insert a third party between the consumer and the service provider? It's really idiotic, when you think about it.....

Posted by: The Conservative Deflator on November 9, 2007 at 1:17 PM | PERMALINK

@FranklyO: But that's the whole point. Libertarianism is Darwinism as a political philosophy. The sick are outliers that if the system was working would die and leave that space for the rest. They would announced their sickliness to potential partners and be prevented from keeping their (obviously sickly) genes in the gene pool. And if certain people could afford better, then social Darwinism kicks in, rewarding those that have the most money and allowing them to procreate. This is "rationalist" view upon which Libertarianism is based that all systems will operate in a free market. It's Lord of the Flies as re-imagined by economists.

Posted by: Inaudible Nonsense on November 9, 2007 at 1:43 PM | PERMALINK

I don't see the problem here. There are so many insurance companies. It's a free market. As soon as one company denies you coverage buy insurance from another one. What's the issue? Are you guys going to use this perfectly normal occurrence to foist communist health care on all of us so we have to wait for three years to get a doctor's appointment for common cold or see some nurse practitioner?

Posted by: gregor on November 9, 2007 at 2:00 PM | PERMALINK

I'm as much for universal health coverage as the next person, but I think its worth noting that rescinding an insurance policy is legal. I think its also worth noting that rescinding an insurance policy is only possible when the insured provided materially false information in the application. It's also worth noting that restricting an insurance company's ability to rescind the insurance policies of insureds who've lied on their application will reduce rather than increase the amount of insurance available.

Posted by: Bill on November 9, 2007 at 2:00 PM | PERMALINK

I think its also worth noting that rescinding an insurance policy is only possible when the insured provided materially false information in the application.

I think it's also worth noting that I can shoot nickels out of my nose, and the Kansas City Royals are a shoo-in for the 2008 World Series.

(I like my delusions better....)

Posted by: Davis X. Machina on November 9, 2007 at 2:10 PM | PERMALINK

Wrong Kevin, Health Net is evil, but what is even more evil is that the people who have the power to end this behavior once and for all do not want to and do not care to.

Posted by: Joshua on November 9, 2007 at 2:20 PM | PERMALINK

I'm sure that most posters here read the Bill and gregor posts above and passed on posting a reply because the responses are so very obvious...but here I go anyway. If one company kicks you out, all the companies are gonna do the same thing. And that citizen is left with George Bush's (unbelievable as it might seem that he actually said it, but he did) answer to their need for chemotherapy or whatever: the emergency room. Why would anyone NOT mention a preexisting condition? Obviously, because they know that if they do they will not get insurance. If you get insurance through an employer, then generally no problem. But if you are on your own, all this applies. Or maybe the insurance company does take this person, for maybe a couple thousand dollars a month. Any solution to the current health care mess would have to include forbidding denial of coverage, if insurance companies have to be involved. And as everyone knows, longer waits for non-emergency services are greatly exaggerated in discussions of Canada's single payer system (which they spend something like half of what we do for), and non existent in Germany and France's mixed government/private systems.

OK, maybe the gregor post was satire and I just didn't get it.

Posted by: emjayay on November 9, 2007 at 2:25 PM | PERMALINK

"Sorry, it's just ridiculous to suggest this is not evil. Just because it's sanctioned by the system does not change the fact that it is tantamount to murder."
Posted by: q on November 9, 2007 at 12:39 PM
^^^^^^^^^^^
Yep. Reading the "performance review" is what gave me the creeps. It probably wouldn't be structured much differently than if she was a prison guard at Auschwitz. Hmmm. It would be interesting to see some Blackwater performance reviews float to the surface...

Posted by: Doc at the Radar Station on November 9, 2007 at 2:43 PM | PERMALINK
It's a free market. As soon as one company denies you coverage buy insurance from another one. What's the issue?

-gregor

Hmmmm ... well, there's the fact only the wealthy can pick and choose their insurer.

And then there's the fact that insurers deny coverage to anyone with a questionable health history 99% of the time (and I know -- I spent two years working for an insurance company).

And then there's the fact that treating the health care of American citizens like a widget or car is morally reprehensible and only advocated to those lacking an ounce of human decency.

But that's pretty obvious to those of us who aren't functionally retarded.

Posted by: Mark D on November 9, 2007 at 3:56 PM | PERMALINK

The real question, and the one that every other civilized country in the world has already figured out, is why health care should be a for-profit business?

The answer, of course, is that it shouldn't, which is why everyone else has government run single payer health care systems.

Only the USA continue to ignore the inherent financial conflict between providing appropriate medical care for all its citizens and making a profit.

Posted by: mfw13 on November 9, 2007 at 4:01 PM | PERMALINK
It's worth pointing out that Health Net is neither unique nor evil.

Okay, certainly, we don't have the evidence to say Health Net isn't unique, but on what basis do you assert that it isn't evil?

If healthcare is provided on an individual basis in a free market, this kind of behavior is inevitable.

That a behavior is inevitable to occur somewhere in a system, given a certain set of conditions does not make it "not evil". It is essentially inevitable that murder will occur, too, but that doesn't make murder "not evil".

The only way to avoid it is to provide health insurance on a group basis regardless of past history, and the bigger the group the better since it spreads the risk more evenly.

The size of the group is really irrelevant to eliminating rescission as a problem, though it does have the benefit you point to, here.

It's one of many arguments in favor of national healthcare.

Its one of the many arguments in favor of certain particular models of national healthcare, but its inapplicable to some models of national healthcare that actually get proposed, such as individual purchase mandates with need-based subsidies, which, as they rely on individual market purchases of the same type that go on in the status quo system, often do not eliminate the particular problem at issue here.

Unsurprisingly, these same systems are also the "national" or "universal" systems most likely to be embraced by the insurance companies.

Posted by: cmdicely on November 9, 2007 at 4:02 PM | PERMALINK

I've seen the future, brother:
it is murder. - Leonard Cohen

Posted by: Doc at the Radar Station on November 9, 2007 at 4:21 PM | PERMALINK

Companies are permitted to rescind policies in only one circumstance: fraud in the application materials. E.g., a small employer has an employee wth AIDS and doesn't tell the insurer, which then writes a policy for a premium that's insufficient to cover AIDS expenses. You think there's no fraud in the health insurance business?

If we had single payer that person with AIDS would have coverage guaranteed, but we don't and the insurer cannot pay the costs if it can't charge the premiums.

When an insurer finds that an employer has unusually high expenses, it investigates to determine whether there was a misrepresentation of pre-existing conditions in the application. If so, that's fraud and it will rescind the policy.

This has nothing to do with individuals being good or evil. This is a systemic problem. Insuring sick people is a losing proposition and no competitive business will do it voluntarily. As long as health care is a competitive for-profit industry, insurers will do whatever they can to insure only healthy people.

Posted by: Bloix on November 9, 2007 at 4:22 PM | PERMALINK

I think its also worth noting that rescinding an insurance policy is only possible when the insured provided materially false information in the application.

Er, not quite:

The deal is expected to send shock waves through an industry that had stood together in defense of insurers' ability to retroactively rescind coverage for any application omission, even honest mistakes.

(Italics mine.)

You can read the series in the LA Times, and it's pretty horrifying. The one woman I remember came down with a major eye disease that would require surgery and the company rescinded her policy because it turned out to be a genetic condition that she was not aware she had. But because it was genetic, Blue Cross insisted that she had "lied" on her application.

She eventually got the surgery, but not before she permanently lost the sight in one eye.

Oh, and then there was the woman whose policy was rescinded for supposedly not disclosing an earlier surgery, even though she provided them with a copy of her application that showed she had disclosed it. Too bad, so sad, no insurance for you.

Posted by: Mnemosyne on November 9, 2007 at 4:29 PM | PERMALINK

Actually, Bloix, I could be wrong, but an employer who purchases a group plan for its employees is under no obligation to screen new employees for any health condition and then tell the insurer.

First of all, unless the job requires it, it's illegal to screen people for health issues prior to employment.

Secondly, it's not the duty of the employer to do any such thing, legally or otherwise.

And third, most "pre-existing conditions" clauses only apply to those who have had a lapse in coverage, not a previous medical condition (which is why it's a bit of a misnomer).

For example, I had my first back surgery before I started at my current company. They were under no obligation to discover that, nor tell the insurance company.

So when I had my second surgery, all the various tests and doctor visits, and an upcoming third one are just part of the deal.

Now, if it was a private plan and I had left that info off the application, then okay -- that's fraud.

But in this case, I'm part of a group, company-provided plan, so there's not a damn thing the insurer can do about it.

Of course, I willingly admit that I could be wrong, but I don't think so.

Posted by: Mark D on November 9, 2007 at 4:35 PM | PERMALINK

I should also note that, here in Kansas City (Missouri side), I don't recall ever having to fill out a form for insurance when starting a job that asked what previous health issues I've had. Only forms asking what insurance I had before.

But maybe that's just the companies I've worked for ... so again, YMMV.

Posted by: Mark D on November 9, 2007 at 4:38 PM | PERMALINK

A nice hacker could go in to an insurer's computer files and create a lot of undisclosed ailments for Barbara Fowler, and it would not be unique nor evil.

Posted by: Brojo on November 9, 2007 at 6:04 PM | PERMALINK

HealthNet's actions are personally frigtening to me. As a newly-enrolled HealthNet member, I am clearly one of those who might be "targeted" as a likely candidate for recission, not because I did anything wrong or falsified an application (which I clearly did NOT), but because of multiple health claims over the last several years that were quite expensive. As a former employee of a large California HMO, and a grateful beneficiary of excellent healthcare that saved my life twice, I am more aware than most other people about the financial decision-making process of HMOs. Even though it has not been my experience to be denied coverage or handled in an underhanded or malicious way, I can see how healthcare companies beholden to the bottom line could foster "cost-cutting" schemes like this one.

As if I weren't already sick...

Posted by: Chris C on November 9, 2007 at 6:46 PM | PERMALINK

My background is retired nurse.

First, notice this is an arbitration which is now imposed upon everyone not a day in court. Thus, getting an attorney is very difficult and usually has to be upfront not on contingency.

Second, people for recission are targeted by zip code. They know that the odds are there is no money to protest.

Third, the woman involved is black and a pink collar worker not likely to generate a lot of sympathy. That is the way the insurance company looks at it.

Fourth, they had no problem taking her money until they had to pay out. This is true for many many policies. When they have to pay out, then they find a way to rescind. Often after approving treatment, so that the patient then faces financial ruin to deal with immediately on top of being sick.

Fifth, these recissions are for being over weight which they can define as to when and how it is applied. Preexisting conditions can be anything treated by over the counter drugs if there is a bar code record like a CVS freguent or discount user. The pre existing condition usually has nothing to do with the problem being treated. Now no knowledge is considered no excuse, you simply should have known.

Anyone thinking this is not criminal or fraud on the part of the insurance companies is not a consequential thinker and this is the big reason American health is going down the tubes.

Posted by: yoduuuh on November 9, 2007 at 9:24 PM | PERMALINK

yoduuuh, Thanks for your comments. We need more insider folks like you that know how the system works to expose it. So, based on what you just said... the following scenario could be quite possible:

1) You work for a company with a decent group health plan.
2) You have some problems with heartburn and see your doctor and he recommends Prilosec OTC™.
3) You try the Prilosec OTC™ for two weeks, things get better, then when you stop it the heartburn symptoms return.
4) You go to your PCP again and she recommends to continue the Prilosec OTC™ on an indefinite maintenance basis and diagnoses you with GERD (albeit a mild uncomplicated form).
5) Taking the Prilosec OTC™ continues to control all your symptoms effectively.
6) Your employer goes belly-up/bankrupt and everyone is laid off.
7) You decide that getting a cheaper "private plan" on your own instead of paying COBRA premiums is a better/affordable deal while you look for a new employer.
8) You don't list GERD as a pre-existing condition when you apply for the new private plan.
9) During the time you are unemployed you are diagnosed with cancer.
10) You file claims for chemotherapy and your policy is rescinded because you "failed" to disclose your GERD "condition".

Posted by: Doc at the Radar Station on November 9, 2007 at 10:41 PM | PERMALINK

That a behavior is inevitable to occur somewhere in a system, given a certain set of conditions does not make it "not evil". It is essentially inevitable that murder will occur, too, but that doesn't make murder "not evil". - cmd

Damned straight.

"In just the past year, a full 25 percent of us didn't visit the doctor when sick because we couldn't afford it. Twenty-three percent skipped a test, treatment, or follow-up recommended by a doctor. Another 23 percent didn't fill a prescription. No other country is even close to this sort of income-based rationing. In Canada, only 4 percent skipped a doctor's visit, and only 5 percent skipped care. In the U.K., those numbers are 2 percent and 3 percent. Few of our countrymen are waiting for the care they need, that much is true. But that doesn't mean they're getting it quickly. Rather, about a quarter of us aren't getting it at all.:
Ten Reasons Why American Health Care Is so Bad
Ezra Klein

Posted by: MsNThrope on November 11, 2007 at 9:57 AM | PERMALINK




 

 

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