Lisa Girion in the LA Times reports that one of the uglier pieces of health plan activities in recent years may be drawing to a close. Wellpoint’s Blue Cross of California unit has agreed that it will only rescind policies in the future if there is obvious fraud, rather than an explainable oversight or error.
Blue Cross of California agreed Thursday to stop canceling individual health coverage unless it can show policyholder deception — a major shift by the state’s largest health insurer that could lead to sweeping industrywide changes. The move is part of an effort to settle a class-action lawsuit on behalf of as many as 6,000 people canceled since late 2001. It is an about-face for Blue Cross in what had become known as "use-it-and-lose-it" health coverage because the cancellations were often triggered by patients’ claims for treatment.
This is something of an improvement, although of course in a decent world there’d be guaranteed issue and community rating so the whole practice would be moot—and Wellpoint is fighting that in California. However, they need to cut the crap about “only 1,000 policies got rescinded and it’s less than 1%” which comes up in the article again. That’s of course lying with data. The vast majority of people in the individual market who get past the underwriting in the first place are healthy. That’s why the medical loss ratio for BC of California’s individual business is below 60%—yes apparently that’s the number. So there’s likely to be less than 10% of the enrollees and probably close to 5%, who are running up large bills in the first place. Which means that Blue Cross was scouring every one of those applications and canceling some 5–10% of them. They weren’t looking at the applications of the vast majority who didn’t have any major claims.
I still want to see how they settle the individual claimants who busted them for cancellations when BC clearly in error. Or are they in the class action too?
UPDATE: I’m adding this comment from the always sensible Barry Carol: "I wonder how much the new CEO (and former General Counsel), Angela
Braly, had to do with this settlement and whether former CEO, Larry
Glasscock, would have agreed to it. At any rate, it looks like common
sense has prevailed, and it’s about time."
This reminds me that recently Wellpoint changed its bonus structure to relate it to the overall health of their members. I was at a meeting with some Wellpoint employees (in their IT stack) last week, and they highly concerned about what that meant. But perhaps it means that the medical types (presumably led byCMO Sam Nussbaum) are gaining the upper hand over the financial underwriting types–who’s leader as Barry points out, just got off the ship.
Meanwhile if you want some amusement looks at these comments about what some Wellpoint employees think about the new bonus policy!
“What is the new rule, that insurers have to hire clairevoyants to read the minds of applicants to determine whether their mistakes are “oversight” or “fraud”?
New rule is that Blue Cross will need to apply the same standards of evidence that other companies have been using for past 30 years.
Ask a simple question: “Have you seen a Dr is last 60 days?” Receive the answer and issue the policy.
A few months later, review the question and answer.
Was the response to the question TRUTHFUL?
So easy, even a Blue Cross claims examiner can handle it!
Each case handled on own merits. Would a group of 12 disinterested believe that this applicant forgot that his Dr told him to have surgery soon? That his child had been seen in ER for a suspicious lump on jaw in past 4 weeks? Or that he forgot he was taking 6 prescription meds every morning?
But if he forgot to mention a 1979 visit for gout or an ear infection in 1983, then these items would NOT be a reason to rescind.
John…there were guys setting fire to the house–many of whom the nationwide Blues busted (included some guy having an unnecessary vasectomy and circumcision). But this rash of cancellations wasn’t about that. Instead this was about BC coming along and saying, “your house had a potential fault in the electrical system & you should have told us even though it was put in 20 years before you moved in and it had passed the inspection.” After all any condition can be argued to have been pre-existing from birth.
But I do agree “guaranteed issue by regulatory diktat” is much closer to the system I prefer, and Wellpoint and the rest are going to get us there eventually as their alternate future is no future.
Matthew, what the devil is “obvious fraud”? Fraud is by definition not obvious, because obvious frauds do not occur. For a fraud to take place it must be, well I suppose the right word is: “confounding”. All insurance markets are susceptible to fraud by their beneficiaries. Reason demands that insurance contracts, above all other contracts, must be scoured for malfeasance.
In a world where grown-ups sign contracts, the signator is responsible for “oversights” that create false information in the contract, not the counter-party.
What is the new rule, that insurers have to hire clairevoyants to read the minds of applicants to determine whether their mistakes are “oversight” or “fraud”?
This unprecedented nonsense appears to be little more than guaranteed issue by regulatory diktat, which brings us closer to the system you prefer.
Man I wish my homeowner’s insurance worked like that: set fire to the house, and buy insurance the next day!
This regulatory over-reach, and California Blue Cross’ caving in, will increase individual health insurance premiums, one area of health policy where California has not fared too badly to date.
(Plug: we will discuss this topic at a panel discussion on May 31 in Sacramento, Vital Signs & Side Effects: The Likely Consequences of California Health Reform, to which all your readers are invited!)
I wonder how much the new CEO (and former General Counsel), Angela Braly, had to do with this settlement and whether former CEO, Larry Glasscock, would have agreed to it. At any rate, it looks like common sense has prevailed, and it’s about time.