Matthew Holt

Poizner: talks tough, wimps out WITH UPDATE

Previously in the long running retroactive insurance cancellation story I’d accused Steve Poizner (yes, the only Republican I’ve ever voted for and) California state insurance commissioner of being a bit soft. Now he really needs calling out.

Saint Lisa Girion reports in the LA Times today that to make up for cancelling 678 policies, Blue Shield, yes the warm cuddly pro-universal care loving non-profit insurer that’s not Wellpoint, has to reinstate them. Which means they have to reinstate the policies and pay the bills that they’d previously decided not to pay.

Now Blue Shield has been the most aggressive of all the insurers in the state in claiming that it had the right to retroactively cancel policies. Most of the others settled ages before. Meanwhile Poizner last year said this about Blue Shield:

Calling the allegations "serious violations that completely
undermine the public’s trust in our healthcare delivery system and are
potentially devastating to patients," Insurance Commissioner Steve
Poizner said he would announce today that he would seek a $12.6-million
fine.

He also said at the time that insurers had no right to cancel policies once they’d done their underwriting.

But Insurance Commissioner Steve Poizner says
California law obligates insurers to do all the medical fact-checking
before granting a policy, not after. "A consumer gets a policy, then
gets ill and starts filing claims. Blue Shield then looks at the
application and decides to cancel the insurance," Poizner says. "It’s
wrong. It’s illegal, and I’ll put a stop to it."

When he settled with Healthnet for
doing the same thing, the state extracted a $3m fine, which I called
soft, But at least Healthnet had been stung for at least one $9m
penalty in arbitration. So now Blue Shield settles and for that they
pay a huge fine of…..

….nothing.

The LA Times story says that

Blue Shield President Duncan Ross said the company was pleased with the agreement.

I’ll bet!

So now, after all the tough talk,
according to Poinzer you can break the law and if you get caught your
liability is having to be nice to the people you defrauded. And if
you’re the malfeasant that fights the hardest, you get punished the
least.

Wow, that’ll really encourage the others.

UPDATE: The Insurance Dept’s very efficient press secretary Darrel Ng has emailed me to say:

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Just read your blog
post about Poizner’s most recent
settlement.
There were three
objectives going into negotiations. First, we wanted all of the out of pocket
expenses reimbursed. Second, we wanted those who lost insurance to be offered
new insurance with no underwriting and no exclusions for preexisting conditions.
Third, we wanted changes made to the process and a third party review. (A
failure to do this in a timely manner will result in up to $5 million in
fines.)
The agreement includes
all those items.
So the question
becomes do we try to negotiate for more, or in the current economy, do we get
the 700 people their money and access to health insurance
now?
We chose to do the latter

Of course in my thinking saying that you’re going to fine them $12m and that they did do something wrong, and then actually fining them nothing so long as they change their procedures in the future and make their clients whole for what they did before while allowing them to say that they didn’t do anything wrong are two very different things. So perhaps legally Blue Shield was right and Poizner agreed to the settlement because he thought the State would lose in court (i.e. he was wrong with his tough talk about illegal acts).

Of course, as my ridiculous "discussion" with broker Nate on this other thread shows, the individual insurance market is so broken it needs to be abolished and folded into some type of universal insurance system sans underwriting at all (and yes, with a mandate to pay in, best applied via a progressive income tax system).

So the most important aspect of the cancellations to me is not that the few thousand people who were screwed over get their money back, vital though that is. Instead it’s that the lessons about the impossibility of running an efficient and equitable individual and small group market are learned. And that legislation is passed to get us as close to a social insurance system as possible.

Nonetheless, I still think Poizner wimped out. This shouldn’t have been a negotiation; it should have been a public punishment. Maybe not an execution, but perhaps we could have seen say 6 hours of Blue Shield’s CEO Bruce Bodaken in the stocks in front of his 678 cancellees, with as much rotten fruit available to them as they liked?

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Tom LeithPeterMike MNatefiera Recent comment authors
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Peter
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Peter
Peter
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Peter

Nate, you’d have to describe what the the supplemental insurance is that Canadians purchase or get from their employer. Routine dental is not covered by government plan so most employers offer this. The coverage could also be for travel to U.S. to cover exobitant costs here. So please break it down. Canadians get most of their care paid for by government plan (99%) and don’t want U.S. style system. As for wait times I guess you’re saying there are no wait times here in U.S. or that no one is denied care here? Wait times in Canada are based on… Read more »

Nate
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Nate

Peter, “We won’t solve healthcare access and affordability using insurance models.” If this where true then why?; Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers. http://content.nejm.org/cgi/content/full/354/16/1661 On June 9, 2005, the Supreme Court of Canada ruled in a case dating from 1997, in which a patient, along with his physician, sued Quebec after a year-long wait for hip-replacement surgery. In a decision highlighting the persistent problem of waiting lists in Canada (see graphs),2 the Court voted four to three to invalidate the long-standing prohibition on private insurance for… Read more »

Peter
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Peter

Tax dodging is problem with or without healthcare and a separate issue. If your concerned about tax dodging for healthcare then maybe a dedicated sales tax would ensure everyone pays something. Biggest tax dodgers are the rich by the way who many times get their friends in DC to enable “legal” loopholes. Other countries with single-pay seem to get it to work pretty well – at half the cost. I’ll take single-pay to cover 99% of needed healthcare over failed insurance system here, while giving 1% to insurance companies for cosmetic frills. Insurance always wants to skim the cream anyway.… Read more »

Nate
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Nate

Peter, Are you claiming there are no tax dodgers? If your mandate is funded by tax revenue you just installed a system with millions of people not contributing from the start and millions more under-contributing, numbers sure to rise with the huge increase in taxes. And no I’m not counting the poor who don’t pay taxes. Google British and VAT dodging and see what you get, specifically as it pertains to online auctions and other newer economies. On top of insuring 45 million without insurance your now going to give free insurance to millions more that dodge taxes, great can’t… Read more »

Peter
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Peter

Single-pay assumes everyone mandated to contribute through tax system. No free riders, as it were, unless you count those poor people who cost us so much. Care to pay ag workers fair wages to afford healthcare? In single-pay no need for agents to navigate through complex system of policies designed to add insurance profits not healthcare, as everyone gets same coverage. Insurance is not the solution, universal coverage is the solution.
“Agents are prosecuted far more often then the policy holder”
Seems to be a problem doesn’t it?

Nate
Guest
Nate

It’s like this blog has a fact blocker on it. How did so many people in society get so misinformed? Mike M, I am an expert on ERISA as it pertains to health plans and as I stated it only exempts ERISA plans. Your belief is wrong, in case you need to see proof of this please start by looking up CalChoice. http://www.urban.org/publications/308034.html California passed comprehensive small-group market reforms in 1992 The key provisions of California’s small-group reform laws are guaranteed issue, guaranteed renewal, limits on preexisting condition exclusions, and modified community rating. The guaranteed issue provision was particularly significant… Read more »

Peter
Guest
Peter

“There is no reason for an applicant to honestly complete the app any more.”
Is there any reason for an insurance agent to effectively question an applicant when pushing for their commission, or can they just keep operating with a wink, wink – nudge, nudge? Does the agent get their commission recinded if applicant is proven later to be non-insurable? Does the insured get all their premiums back when policy is rescinded?
With single-pay there is no need to lie as all conditions are covered. The advantage of cutting out slim-ball insurance companies along with the administration/profit/rescind costs.

Mike M
Guest
Mike M

Nate,
i am by no means expert in the legal details but ERISA does prevent regulation of health insurance costs by states due to several nuances in the law. What was initiated to protect workers’ pensions and health care plans ironically perpetuates status quo and prevents local reform from being effective.

Nate
Guest
Nate

Mike M, ERISA = Employee Retirement Income Security Act 1974. In relation to health plans a employer can set up and maintain an ERISA plan under specific guidelines. Churches and government entities are not eligibile for example. Most ERISA plans are exempt from state law directly regulating the health plan. CA has termindus regualtion, for example look up CalChoice. Further ERISA plans are owned by the employer so there is not an insurance company to regualte. Self funded plans don’t suffer from all the problems you hear about, they don’t have 20-30% margins, don’t deny coverage after the fact, etc.… Read more »

Tom Leith
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Tom Leith

Nate said:
> Congrats you just acheived de facto guarantee issue
> and community rating, no one will be able to afford
> insurance in 2 years even if you are honest and
> healthy
So nobody can afford to insure against average risk? What does this mean?
t

Peter
Guest
Peter

“poor people who generally speaking already don’t take as good of care of themselves and live less healthly livestyles to have subsidized care? Free care?”
No, I think poor people should pay more than the rest of us since they are higher risks. Let them start buying (unsubsidized) high quality organic food and move to less hazardous neighborhoods to take control of their own healthcare. It’s time poor people started paying their fair share.

Mike M
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Mike M

I agree with Nate that personal responsibility must be addressed. Unfortunately we do not get very good value for what we pay. One would think that a state could treat health insurance as it does utilities or other essential commodities. However there are only limited areas for regulation by the states {even California} when it comes to health care insurance unlike auto and home insurance. I believe that this is due to ERISA which in part prevents states from regulating interstate companies. This particularly applies to the premium rates. Therefore Insurance Companies can eagerly back health care reform at a… Read more »

Nate
Guest
Nate

(and yes, with a mandate to pay in, best applied via a progressive income tax system). Has the concept of personal responsibility ever been discussed in relation to this? From over a decade of experience peopel that don’t pay for their healthcare tend to use more of it and in a wasteful manner. A progressive income tax system would seem to imply you want poor people who generally speaking already don’t take as good of care of themselves and live less healthly livestyles to have subsidized care? Free care? what exactly are you proposing and how do you intend to… Read more »

Nate
Guest
Nate

Insurance Broker is a very misleading label, that would imply I make a living selling insurance, I administer health plans sold by other insurance brokers. Since you appear to have the eyes of Mr. Ng maybe you could get them to answer a follow up question. Will the Insurance department support and make sure the Attorney General prosecutes insurance fruad if they are going to require carriers honor the policies they issue. If an appliciant lies on their application by either omiting or being dishonest with information will they be prosecuted? Specifically if an individual where to say omit the… Read more »