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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16 replies »

  1. 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 need not income. The question of wait times has/is being managed, for example in Ontario it recently released funding to handle backlog of cataracts and hip surgeries. You can get a better idea of the wait time issue from this link:
    http://secure.cihi.ca/cihiweb/dispPage.jsp?cw_page=wait_times_e
    As with U.S. doctors, Canadian Docs largely don’t support government controls. Not because they’re interested in patient care, but because they’re interested in their own bank accounts.
    This quote from your own link:
    “Michael McBane is the national coordinator of the Canadian Health Coalition, an Ottawa-based advocacy group for the public health system that opposes both privatization of care delivery and a parallel private system of financing care. McBane argues that an increase in private care will undermine the public system, not save it. “There is a lot of money to be made by breaking Medicare. The end game is that people with money no longer want to pay the taxes required to provide quality health care for everybody. They want to shift the cost from government to patients, employers, and third-party payers. Once that is done, the competitive advantage of Canada’s single-payer public health care system will be lost.”
    As well as this about the Quesbec case: “The public, however, was otherwise divided: 43 percent agreed that it “will allow individuals choice and the ability to control their own health care”; 54 percent believed “it will ultimately weaken the public health system that so many people rely on.”
    Ask Canadians if they want to pay 16%+ of GDP in health taxes to get unencumbered access. Canadians understand the relationship between costs and adequate access as they are closer to understanding how it affects their taxes. Privatizing healthcare does not lower costs, if it did we’d have the least cost system in the world.
    When public money is used to pay for services there needs to be a justfication for payment and a reasonable cost system. I guess you think the cost of healthcare here is doing just fine and should be continued. I’ve never seen an insurance company concerned about access to healthcare because of costs as they seem to just pass costs along and let the collateral body count go somewhere else. In fact the insurance industry just wants the tax payer to cover the unprofitable patients as we are seeing in the failing Massachusetts plan.
    “UK
    Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used by less than 8% of the population, and generally as a top-up to NHS services.”
    Yea, 8% that’s a sign the public wants private care.
    As for the other systems I’ll take any of them over the U.S. system. But I doubt the insurance companies and docs here will want those same systems as it would restrict income. It’s not clear from what I’ve read that the Dutch insurance companies are even making money yet despite doing a lot of amalgamation after the new system. All single pay systems control costs through regulation and price controls – something the U.S. system can’t come to grips with yet. If you want some agreement then I’ll give the insurance industry 10% of healthcare frills coverage while the public system covers (and controls) 100% of needed care.

  2. 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 services that are available under Quebec’s public health care plan.
    Also in February, the Alberta government proposed a new health policy framework. Referred to as the “Third Way,” it calls for a wider role for the private sector in providing medical services, including expanding the scope of private insurance, allowing patients to purchase directly certain medically necessary services, and unlike the Quebec proposal, permitting physicians to work simultaneously in both the public and private systems.
    France,
    Finally, for fees that the mandatory system does not cover, there is a large range of private complementary insurance plans available. The market for these programs is very competitive, and often subsidised by the employer, which means that premiums are usually modest. 85% of French people benefit from complementary private health insurance.
    Netherlands
    In 2006, a new system of health insurance came into force in the Netherlands. This new system avoids the two pitfalls of adverse selection and moral hazard associated with traditional forms of health insurance by using a combination of regulation and an insurance equalization pool. Moral hazard is avoided by mandating that insurance companies provide at least one policy which meets a government set minimum standard level of coverage, and all adult residents are obliged by law to purchase this coverage from an insurance company of their choice. All insurance companies receive funds from the equalization pool to help cover the cost of this government-mandated coverage. This pool is run by a regulator which collects salary-based contributions from employers, which make up about 50% of all health care funding,
    UK
    Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used by less than 8% of the population, and generally as a top-up to NHS services.
    I hope you get the point by now. While the US is moving away from an employer funded private insurance system the rest of the world is moving towards it. How is it you can claim we can’t solve HC access problems with an insurance model when the rest of the industrialized world seems to think they can. What do you know that the rest of the world doesn’t Peter?
    Tax dodgeing is not a seperate issue if you institure a new healthcare system based upon a tax that is then dodged. If income fails to meet expectations then benefits would need to be cut. Not that our government doesn’t frequently promose the world then fail to deliver but they usually aren’t so obvious about it.
    What countries are these with single pay, not one of the above have single pay. Their government componet might contribute more then ours but all are far from single pay. UK is probably the closest and private expenditures still equal 14%.
    “Health insurance companies are leaches that contribute nothing.”
    Spoken like someone who has no idea what they are talking about, just ba ba’n like the good sheep.

  3. 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. Health insurance companies are leaches that contribute nothing. Even auto insurance has to be regulated in states to keep those companies honest. We won’t solve healthcare access and affordability using insurance models.

  4. 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 see where this is headed.
    “no free riders”…what tax system are you living under?
    “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”
    How many single pay systems can you name without a private supplemental insurance market? That aregument is non sequitur

  5. 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?

  6. 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 because it was for all products.
    Well over 46% of those with private insurance aren’t covered by ERISA plans, those policies are regualted by states, ERISA has nothing to do with them. States also regulate ERISA plans with minimum stop-loss limits, size requirements, licensing, taxes, and regualtion. You are 100% wrong about your understanding of ERISA.
    Peter,
    Nice assumptions, why bother with facts when you can make them up to support your beliefs right? Many agents have had their license to sell insurance revoked for fraudlently completly apps or coaching applicanats to do so. The relationship between a broker and carrier is at will, if a broker’s block of buisness is costing a carrier money they can fire the broker and not work with them. Agents are prosecuted far more often then the policy holder becuase no one has sympathy for them. Yes an insured gets their premium back if a policy is retro cancelled unless claims where paid then on a rare occasion their premium will be applied to their claims. If a policy gets cancelled the agent loses all compensation, they don’t get large up front payments, they get 5-10% a month for the first year which with some carriers drops the second year. If the policy is cancelled they get a % of nothing as there is no premium.
    For meeting with someone, answering their questions about all the different carriers and coverages, helping to complete the app, getting ti through underwriting and assisting with any future problems brokers make a whopping $10-$20 per month off an individual policy, and thats of sold policies, you don’t get anything for those that don’t buy. Hardly a gold mine.
    Your last comment shows your complete ignorance of the system. Who do you think processes Medicare claims? Slim Ball insurance companies. Most Medicare enrolless have supplement plans which are the same policies administered by the same slim ball carriers sold by the same slim ball agents. Even a single payor system is going to have a private componet to make it palapable to the public.
    Single pay as you claim only works when all people are covered and contributing, the reason we have the problem you complain about is becuase people try to save money by not having insurance until they get sick then want to buy it. Our Current private system would work fine if everyone was forced to participate.
    The problem isn’t the system it’s the people trying to get over on the system.

  7. “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.

  8. 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.

  9. 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.
    Tom Leith,
    It’s not average risk we are discussing. CA DOI just said you can wait till your sick, lie on yoru application say your 100% healthy and never been to any doctor and when the insruance company finds out you lied can’t cancel your coverage. There is no reason for an applicant to honestly complete the app any more. You can’t have a functioning insurance market when you allow people to wait till they are sick to buy insurance. This has all the common since of allowing people to buy auto insurance after they have an accident.

  10. 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

  11. “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.

  12. 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 state level that limits profit and overhead because in the end it will simply not be applicable or enforceable under current statutes.
    I am much more comfortable with a highly regulated non profit insurance pool with multiple players than I am with universal health insurance using progressive taxing.
    This is the health model with the most direct applicability to our current System and works quite well in Switzerland and Taiwan.
    I say this in part because my greatest fear is that the commercial insurance industry will manage the whole system, earn massive profits and emerge as a bigger parasite than it is now.

  13. (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 insure those getting their care for free/cheap don’t bankrupt the entire system? Their care is currently rationed by being in a lausy system with limited providers and slots for treatment. If you add them to a top-tier health plan those limitations would be removed.

  14. 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 fact they where just diagnosied with cancer and not disclose the name of the doctor that diagnosied it so records could be requested would this crime be prosecuted?
    In the past the state has never shown any interest in trying let alone jailing a sick person dieing of cancer. The insurance commissioner appears to have just opened the door to massive fraud. They seem to have given their consent to anyone that needs insurance to lie on their application to get approved and leave carriers no recourse when they are caught.
    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 but you can act surprised for the cameras when it happens.

  15. And this is in a state that actually investigates post-claims underwriting, with elected regulators.
    Now AHIP’s saying they’ll agree to health care reform where they have to offer coverage to everyone. What kinds of post-claims underwriting opportunities do you think they’d have even with guaranteed issue?

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