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.

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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.

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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?

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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.

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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.

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In U.S.A Today this week, elder-care author Howard Gleckman illuminates one of the most important but least discussed issues in the national debate about health care reform: What are we doing to help the elderly and disabled who don’t need acute hospital care but rather personal assistance in their homes. See, “What About Long-Term Care,” May 26, 2009,

Gleckman says Congress is ignoring its chance to change the way our country delivers long-term care ("LTC"), now mostly through Medicare that pays for nursing home treatment which costs thousands more a year than in-home care. Nursing home care could amount to as much as $75,000 a year; a home health aide is paid $20 an hour.

“Congress and President Obama could create a system of universal long-term care insurance, built on a combination of public and private coverage,” writes Gleckman. “They could end the reliance of millions on the welfare-like Medicaid system while reducing the tremendous pressure that program is putting on both state and federal budgets. And, they could further shift the focus of long-term assistance to community care instead of nursing facilities.”

But, concludes Gleckman, long-term care reform is unlikely to happen even though Sen. Edward Kennedy and Rep. Frank Pallone have proposed government-provided LTC insurance that could cost as little as $100 a month.

So where does that leave us? If you are among the seven million Americans who can afford private LTC coverage, you are in good shape to preserve your assets and savings as you age or become disabled. For the rest, this is another wake-up call. Any health reform the federal government is likely to approve won’t be much help for the elderly and disabled. Medicare won’t pay for home health aid, and Medicaid only covers some costs after the patient is impoverished.

Why isn’t the federal government creating a more comprehensive plan? Most likely because it is not getting much help from the most important stakeholder when it comes to the economics of health care, the insurance industry. That industry doesn’t want to take care of the sick, the elderly and the disabled. Rather, insurers are in the business of making money for shareholders. By issuing policies to healthy people then trying to find ways to deny coverage when they get ill, profits can be enhanced. And because they have been getting away with these practices for years means they have no incentive to devise a revolutionary public-private partnership that would provide affordable health care to Americans from the cradle to the grave.

Gleckman calls it a tragedy. What do you think?

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Los Angeles Times business columnist David Lazarus is about as skeptical as we are about the insurance industry’s pronouncement that it is ready to work with the Obama administration to overhaul the nation’s healthcare system. “Insurers Return to the Table Again,” (May 17, 2009). Lazarus asks the question, “Does anybody trust them?” He couldn’t find anyone who said “yes.”

Lazarus compares this round of the industry’s enthusiasm to “serve the national best interests” to the 1970s when the Carter administration attempted to craft a national healthcare policy. “Nothing came of it,” said Alain Enthoven, who was a Carter consultant. “The whole thing was just a joke.” It happened in the 1990s during the Clinton administration. “They said they wanted to be at the table and wanted to deal,” former Clinton health official Karen Pollitz told Lazarus. “Then they all left. They saw that they could kill it.”

Insurance industry lobby America’s Health Insurance Plans’ Robert Zirkelbach told Lazarus “everything’s different this time.” But no one is buying it.

Here’s the industry’s compromise: If the government forces everyone to buy health insurance, the industry will quit denying sick people coverage and equalize premiums for men and women. And that’s if the Obama administration scuttles its plan for public insurance that would compete with the private sector.

And Lazarus’s point is this: This time, it’s not about what’s “politically feasible and financially palatable.” No, he says, this time it’s about the people who can’t afford health insurance but can’t afford not to have it. That, he concludes, is all of us.

We hope the Obama administration reaches the same conclusion and forces the insurance industry to keep their promises. But we’re still skeptical.

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America’s Health Care Plan Agrees the Practice Should Be Eliminated

U.S. Senator John Kerry introduced a bill this week that would end the insurance company practice of charging women as much as 50 percent higher premiums then men, reports UPI - “Health Insurers Agree to End Gender Bias.” The move could affect as many as 5.7 million women who are not covered by employer-sponsored plans but purchase individual coverage.

“The disparity between women and men in the individual marketplace is just plain wrong, and it has to change,” said Sen. Kerry. Testifying for the industry, Karen Ignagni of America’s Health Insurance Plan agreed that the industry should eliminate the practice.

The Associated Press took a more cynical view of insurer acquiescence. “Health Insurers Offer to Lower Rates for Women,” http://www.latimes.com/features/health/la-fi-insure-women6-2009may06,0,1110808.story?track=rss/. “The industry is trying to head off creation of a government health plan,” the article reported, “that would compete with companies to enroll middle class workers and their families.” Insurers fear of a government plan would ruin their business, and the industry is doing everything it can to prevent a public system.

That means that insurers are doing an “about-face” on financial positions they have insisted for years are necessary to keep them solvent. Such positions include charging women age 19 to 55 higher premiums because they are “more likely then men to have higher healthcare costs due to childbearing, a proclivity toward certain chronic illnesses and more routine healthcare habits.” In March, the industry agreed to stop charging sick people higher rates if the federal government required all citizens to have health insurance.

Whether or not the federal government is able to pass a public healthcare agenda, healthcare reforms that benefit women and the disabled are long overdue. Insurers subject illnesses that predominately affect women, such as multiple sclerosis, fibromyalgia, chronic fatigue, lupus, anorexia nervosa and bulimia (to name a few) to a double standard: If you are a woman who might suffer from one of these diseases, you get charged more on the front end in premium costs. But if and when you are diagnosed with one of these conditions, insurers routinely deny benefits when they are needed, or worse, cancel the insurance.

To quote Sen. Kerry, that is “just plain wrong.”

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Late last month a New Jersey federal court approved a class action settlement requiring Horizon Blue Cross of New Jersey to expand benefits for its 1.5 million policyholders with eating disorders, reports the New Jersey Law Journal.

As a result, Horizon can no longer limit treatment it covers to 20 outpatient visits each year and only one month of hospitalization, and 556 patients will split a $1.2 million award. Horizon agreed that in the future it would treat eating disorders the same it would other biologically based mental illnesses.

The article points out that the settlement provides insureds substantially the same benefits they were set to receive in January when the U.S. Mental Health Parity Statute becomes effective.

Although in California, state law provides a much broader mental health parity statute, people with eating disorders often must run a procedural gauntlet to get carriers to pay for residential treatment. In a recent Kantor & Kantor case, the plaintiff paid for her own treatment while a federal judge required an appeal to the California Department of Managed Healthcare which punted the case to the California Department of Insurance, which then sent the case to an outside reviewer for independent analysis. While the review resulted in a ruling favorable to the plaintiff, the time spent obtaining it was detrimental to the patient’s recovery.

Class actions such as the New Jersey case against Horizon draw attention to the disparate treatment people with eating disorders – mainly women – receive from their health insurers. We hope California takes note and revises its procedural quagmire, which proves to be simply another stalling tactic and roadblock carriers can take advantage of to intimidate their customers.

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83-pound Sacramento-Area Woman Denied Life-Saving Treatment

Kantor & Kantor, LLP, is appealing to the California Department of Insurance on behalf of Kimberly Shepard, a young wife and mother in danger of losing her life from the debilitating effects of Anorexia Nervosa because her health insurer United HealthCare Insurance Company declined her claim for benefits to pay for residential treatment.

The appeal requests that the Department of Insurance order United Healthcare to reverse their denial of benefits. Earlier this month, the U.S. District Court for the Northern District of California denied Shepard’s temporary restraining order to enjoin United HealthCare from continuing to withhold benefits.

Shepard sought treatment in February at Monte Nido residential treatment center in Malibu, CA a preferred provider under Shepard’s health policy. Although Shepard’s condition more than met the policy’s conditions for residential treatment, United HealthCare denied her claim. As a result, Shepard exhausted her family’s financial resources to pay for treatment. By April 1, Shepard could not longer afford treatment, even though her doctors agreed she had not recovered enough to make appropriate life-sustaining decisions regarding food. Presently, Shepard’s prognosis for recovery is poor if she is not able to continue residential treatment.

“United Healthcare is obligated to pay benefits that will save Ms. Shepard’s life,” said Shepard’s lawyer Lisa Kantor. “The family is out of money. Her husband, an Elk Grove firefighter, and her 3-year-old son, are desperate to ensure that this loving wife and mother recover and return to her home. We are urging United HealthCare to do the right thing and pay for her treatment.”

Under her policy, Shepard must meet only one of the following three requirements to qualify for residential treatment at an eating disorder facility: severe impairment in psychosocial function due to a behavioral health condition; signs of a behavior health condition that clearly demonstrate a need for 24-hour supervision; or a deteriorating health condition likely to require inpatient care. Shepard’s psychiatrist Dr. Cindy Murrer and the attending physician at Monte Nido, Dr. Gary Schneider, both testified that she met all three requirements.

United HealthCare’s “peer review” report by a company doctor who never examined Shepard, conflicted with her treating physicians’ diagnosis, opined that even though Shepard weighed less than 85 pounds and was unable to care for herself, she “does not meet medical necessity criteria for admission to residential mental health treatment.” The report found that Shepard “is not showing any significant physical abnormalities,” had only “some suicidal ideation,” and “had not participated in appropriate eating disorder treatment at lower levels of care.”

“Those findings are untrue and inappropriate bases for denial of coverage,” says Kantor. “United HealthCare’s blatant disregard for its policyholder’s welfare is a flagrant breach of the terms of its policy.”

Shepard has also filed a complaint in the Northern District court against United HealthCare for damages for breach of contract and breach of the covenant of good faith and fair dealing.

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Last week the health insurance industry informed U.S. Senate committees considering ways to overhaul the country’s health care system, that insurers are willing to accept more aggressive regulation of their premiums, their benefits, their underwriting practices and “other activities,” reports the New York Times “Insurers Offer to Soften a Key Rate-Setting Policy.” The concessions were documented in letters signed by the presidents of the major trade groups that represent most of the industry, Karen M. Ignagni of America’s Health Insurance Plans and Scott P. Serota of the Blue Cross and Blue Shield Association.

In the letter, the industry said it was willing to devise a new business model that would no longer charge sick policyholders, or those with a medical history that could lead to illness, higher premiums than healthy policyholder pay. Instead, they would spread the cost equally over both groups.

In return, the industry wants Congress to adopt a plan that requires health insurance coverage for everyone but cease its consideration of a government-run health insurance plan. And they still want to retain the right to base premiums on age, place of residence and family size.

While we would like to applaud the industry for finally considering what it should have done all along, we are still suspicious of the motives behind this change of heart. In truth, not much has changed.

The industry, fearing the loss of millions of policyholders to a government plan, is offering its own systemic overhaul in order to sign up millions more subscribers under a federal mandate. By retaining the right to base premiums on criteria other than health, a little creative accounting could place insureds right back into the same dilemma of unaffordable insurance they thought they were being rescued from.

Who will keep the industry honest? State regulators around the country are forcing companies to reinsure policyholders whose coverage was rescinded on mere pretext after they became ill. How much more time and taxpayer resources would regulators expend in the future ensuring carriers follow through on their promise to equalize premiums?

Now is not the time for Congress to cave in to insurance demands that will only solve part of our country’s healthcare problems. In addition to equalizing premiums, the industry should standardize its offerings and commit to restructuring claims-handling processes to make them transparent, streamlined and less burdensome on its policyholders. Congress should also insist that carriers return to making benefit decisions based on reliable medical diagnoses rather than the subjective evaluations of insurance adjusters charged with cost-control.

Insurers want a quick fix so they can get back to business as usual. We urge Congress to see beyond this sham compromise and use its leverage to ensure health insurance changes that will serve consumers well for decades to come.

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Time healthcare correspondent Karen Tumulty last month provided an eye-opening account of one man’s journey through the healthcare system by chronicling her brother Patrick’s three-year struggle to receive the level of treatment he needs to fight kidney disease. “The Health Care Crisis Hits Home.”

As the article unfolds, almost everyone involved in Patrick’s care – his family, his doctor, his treatment center, his medical creditors, and his county health care program – showed compassion and a willingness to offer solutions for his care. Everyone, that is, except his insurance company.

Tumulty’s brother, who also suffers from Asperger’s syndrome, a high-functioning form of autism, was relying on a series of short-term individual medical insurance policies he purchased as a temporary worker while seeking full-time employment with employer-provided health insurance. He paid premiums on the policies issued by Assurant Health for six years. It wasn’t until he got sick and was denied coverage that his family understood how “underinsured” he was.

Patrick had been continuously covered by Assurant since 2002, but as he transferred into successive short-term policies, the company treated him as a new customer each time. As a result, because Patrick underwent tests for possible illnesses while one policy was in force but was not diagnosed with his disease until after a new policy was issued, the company considered his illness a pre-existing condition and denied coverage.

Karen Pollitz, project director of Georgetown University’s Health Policy Institute and a leading expert on the individual-insurance market told Tumulty, “These short-term policies are a joke. Nobody should ever buy them. It is false security that is being sold. It’s junk.”

Tumulty’s experience with her brother has caused her to question the Obama Administration’s plan to allow people to opt out of the employer-provided insurance market to purchase their own individual coverage. The premise behind that initiative is that the consumer is the better able to determine which policy suits his or her own needs.

“Pat’s experience suggests it is difficult for an individual to make such judgments,” writes Tumulty. “And the existing market for these kinds of policies leaves a lot to be desired. A 2006 Commonwealth Fund study found that only 1 in 10 people who shopped for insurance in the individual market ended up buying a policy. Most of the others couldn’t find the coverage they needed at a price they could afford.”

Tumulty and Patrick ended up filing a complaint against Assurant with the Texas Department of Insurance. Less than a month later, the company – although it admitted no wrongdoing and even had the audacity to blame Patrick for purchasing inappropriate insurance – agreed to pay some of Patrick’s claims.

And guess what else Tumulty uncovered as she investigated Assurant and its claims-handling practice? Last year, Connecticut insurance regulators fined Assurant $2.1 million for alleged “postclaims underwriting,” that is, belatedly reviewing short-term policyholder’s medical records to uncover pretexts to deny claims or rescind policies. Assurant paid the fine, but admitted no wrongdoing.

Tumulty discovered what we’ve been saying on the blog for quite a while. Healthcare reform is a necessity, but it should begin where the majority of the problems lie: with an industry quick to collect your money for whatever fly-by-night products they create and market as long as you are well, but increasingly loath to fulfill their part of the agreement once you get sick.

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Los Angeles Times reporter Michael Hiltzik once again comes out fighting on the side of consumers in his March 9 column examining an insurance industry trade group’s policy brochure purporting to support universal healthcare and the Obama Administration’s plan to improve the system. “Health Insurers Pay Lip Service to Reform.”

But before inviting us to celebrate the industry’s 180-degree turnaround, Hiltzik examined the fine print and spoke to a number of industry observers who convinced him American Health Insurance Plans is only repackaging its same old proposals to transfer the cost of care for the sickest people to taxpayers and to gain freedom from “pesky state regulations limiting their freedom.”

“Veterans of earlier healthcare battles justly wonder if the industry is merely trying to get out in front of the parade, the better to lead it into a dead end,” Hiltzik writes.

Meanwhile, as Hiltzik reports, doctors “split their working hours 50-50 between seeing patients and dickering with insurance companies over claims and preauthorizations.” That’s a travesty!

We agree with Hiltzik that insurance industry healthcare “reforms” can’t be trusted. No matter what federal legislation eventually becomes law – and we’re not holding our breaths in anticipation – state regulators are charged with much more than standing on curb watching the parade. They need to get strong where they have been lax in regulating this industry and then stay on top of it.

During the next election cycle, California will elect a new insurance commissioner. Whoever is willing to take on the insurance industry and transform that office will likely be hailed as a hero all along Main Street. But he or she needs to act soon, before the sun sets and all the parade-goers straggle home.

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Lisa Girion of the Los Angeles Times reported this week that Blue Shield has become the latest California health insurer to reinstate policyholders whose insurance was rescinded when they applied for medical benefits. Nearly 700 people not only regained their coverage, but also were reimbursed for their medical bills. http://www.latimes.com/business/la-fi-insure7-2009jan07,0,2471877.story

The state Department of Managed Health Care had sued Blue Shield, along with most of the state’s other health insurers, for using innocent mistakes on policy applications as excuses to cancel policies after the insured became ill. Thousands of California policies have been illegally rescinded, the lawsuits allege.

While insurers continue to settle the suits and reinstate and reimburse their policyholders, we agree with consumer advocates who believe the Department of Managed Health Care should do more to regulate the practice of rescission in the future. Some have even suggested that Commissioner Poizner left Blue Shield off easy by this settlement, and that such a settlement will NOT discourage this practice by insurers in the future. We urge the department and state Insurance Commissioner Steve Poizner to complete the regulations he promised that would penalize insurers for their rescission practices, and deter such future conduct.

We also wish to applaud Ms. Girion and the Los Angeles Times for continuing to report about this important consumer-protection issue and keeping government officials accountable to the public. 1/8/09 AK

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This week, U.S. District Judge Faith Hochberg approved a class action settlement that awarded nearly $300,000 to 119 Aetna Insurance Company policyholders who were denied benefits for eating disorders, reports the New Jersey Law Journal. Hochberg also allowed $350,000 in attorneys’ fees for plaintiff cou