California Insurance Lawyer Blog

Is anyone surprised by Los Angeles Times reporter Lisa Girion’s article “Insurers Refuse to Limit Policy Cancellations"?

Executives from three of the nations largest insurers were “courteous and matter-of-fact” in their testimony before Congress about carriers’ practice of canceling coverage for sick policyholders known as rescission. When asked it the industry planned to stop the practice, all three executives said, “No.”

Members of the House Subcommittee on Oversight and Investigations must have been dumbfounded by the response, particularly those members who have taken up the industry’s cause in opposing government-sponsored health insurance.

“When insurance companies go under oath and admit they are cancelling 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,” said Consumer Watchdog advocate Jerry Flanagan. “It opens the way for a public option to hold the companies in check.”

It appears to us the health insurers must not be too worried about the possibility of a public plan or simply confident that they can influence Congress against it the same way they have for the last 30 years.

Will it take a public option to convince insurers to treat policyholders fairly? We wish we could say yes, but in all likelihood rescission practices, as well as denials and delaying tactics, may be so firmly entrenched in the way the industry does business, nothing but a complete overhaul by state and federal regulators – or fines that amount to more than just a slap on the wrist -- would make a difference.

A couple of weeks ago we wrote about United Healthcare’s benefit denial for a young woman who's life is being threatened by her Anorexia.

Sacramento Bee healthcare writer Carrie Peyton Dalhberg reported June 14 about our client and her stuggle (Shepard v. United Healthcare) - “Woman Struggles to Escape Anorexia’s Grip.”

Because of the health plan’s delaying tactics in providing benefits, Ms. Shepard’s family exhausted its financial resources paying for her inpatient care. Our appeal to the California Department of Insurance was successful – United Healthcare was held responsible for Ms. Shepard’s medical expenses. The ruling came a few hours too late, however. Ms. Shepard had been discharged that morning. Ms. Shepard participated in outpatient care after her return, which proved unsuccessful. The article details the tragic result.

Litigation in this case is ongoing. We continue to fight for benefit payments on behalf of people suffering from disabling illnesses and conditions against insurance companies whose delay and deny tactics toward their own policyholders cause hardship and despair.

You’d think that the insurance industry, faced with the prospect of competition from a proposed national health plan, would do everything it could right now to keep its customers happy. So why did Blue Shield raise its rates this month – as much as 54% for one policyholder – Los Angeles Times columnist David Lazarus questioned. “Blue Shield Hits Health Insurance Policyholder With 54% Rate Hike.”

Blue Shield policyholder Ruta Miller, who pays for an individual policy, received a letter from her insurer alerting her that her “rates are changing due to rising costs across the healthcare industry. Major drivers include hospital upgrades, new technologies and expensive new drugs.”

“Blue Shield could have made these claims at any point over the last 50 years,” writes Lazarus. So why now?

Company spokesman Aron Ezra blamed hospitals and said, “We agree that insurance premiums are rising far too fast -- and this is symptomatic of our broken healthcare system. Our system needs an overhaul.”

But if that’s the case, why is the industry working so hard to prevent an overhaul and keep the status quo?

Miller’s increase was higher than most policyholders experienced, said insurance brokers, who said the rate increases this year run from 8% to 28%. Miller’s increase was so high because she is on the high end (even though she is healthy), apparently because she turns 45 this year, an age at which Blue Shield arbitrarily decides to increase rates for all policyholders.

People with private policies get hit hardest by insurers, explains Lazarus, because they don’t have the bargaining power of large employers to keep rates down. That’s what a government-provided healthcare would solve by creating a pool for everyone without employer-provided insurance, spreading the risk and controlling costs. But it would also allow people like Miller – millions of people, in fact – to flee big insurance rate-increase abuse for a more affordable government option.

But that hasn’t seemed to deter Blue Shield. It also begs the question: Where is the California Department of Insurance when you need them?

Will the nation see healthcare reform by the end of summer? Although President Obama is confident he has a workable plan in place, most industry observers believe this latest attempt won’t fare any better than past attempts. “Obama Takes His Health Care Case to the Public,” New York Times.

The stalemate surrounds two issues. The first is the insurance industry’s refusal to consider the creation of a public insurance plan that would compete with the private sector. The industry has agreed to a compromise, which would mean more regulation of insurance premiums and insurer conduct. But we tend to think the industry will continue to fight any government intervention in how it does business.

The other issue involves eliminating the tax break on employer-provided plans. The compromise here might be a limited, less disruptive tax break, which Los Angeles Times columnist Ronald Brownstein says may be the trade off Americans are willing to make if it means slowing down the rise in healthcare costs. “In effect,” writes Brownstein, “limiting the tax exclusion would mean that those with coverage would be purchasing insurance for their insurance.” “Will Americans Buy a Healthcare Trade-Off?”

And then there’s Sen. Edward Kennedy’s bill that includes a long-term care provision that would make long-term care government-provided insurance available for $65 a month. The insurance would provide for modestly priced in-home care, not the more expensive nursing home care, and policyholders would have to pay into the system for five years before receiving benefits. “Senator Edward Kennedy Releases Health Care Bill; Includes Long-Term Care Provision.”
The likelihood of Kennedy’s bill making its way through Congress is negligible, since affordable long-term care insurance will be vigorously opposed the an industry that reaps considerable profits from sales of much more expensive policies. And that’s really the bottom line about why insurers will never support any substantial healthcare reform but will continue to oppose any meaningful legislation.

Insurers are in the business of making money, not providing healthcare. That’s why many companies delay and deny benefits or won’t even insure people who are ill. And they are doing so with little regulation and no competition. Why should they support change? The federal government wants to ensure that everyone in America has access to healthcare by creating affordable policies, while keeping down medical costs. Those two interests are counter to one another, and as long as the insurance industry has a dominate seat at the healthcare reform table, little will be accomplished.