The Dumbest Thing I Have Ever Seen An Insurance Company Do

6a00d8341c909d53ef01157023e340970b-pi And, I’ve been in the business for 37 years.First, let me
stipulate we really need a system of universal care where everyone gets
to have insurance. But we don’t yet so certain rules are unavoidable
until we do.

Here are a few separate clips from today’s Los Angeles Times article, “Health Insurers Refuse to Limit Rescission of Coverage:

of three of the nation’s largest health insurers told federal lawmakers
in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive.

“The hearing on the controversial action known as rescission,
which has left thousands of Americans burdened with costly medical
bills despite paying insurance premiums, began a day after President
Obama outlined his proposals for revamping the nation’s healthcare

“But they would not
commit to limiting rescissions to only policyholders who intentionally
lie or commit fraud to obtain coverage
, a refusal that met with dismay from legislators on both sides of the political aisle.”

executives — Richard A. Collins, chief executive of UnitedHealth’s
Golden Rule Insurance Co.; Don Hamm, chief executive of Assurant Health
and Brian Sassi, president of consumer business for WellPoint Inc.,
parent of Blue Cross of California — were courteous and matter-of-fact
in their testimony.”

“The industry has tried very hard in this
current effort not to be the bad guy, not to wear the black hat,’
Begala said. ‘The trouble is all that hard work and goodwill is at risk
if in fact they are pursuing’ such practices.”

“But rescission
victims testified that their policies were canceled for inadvertent
omissions or honest mistakes about medical history on their
applications. Rescission, they said, was about improving corporate
profits rather than rooting out fraud.”

“Late in the hearing,
Stupak, the committee chairman, put the executives on the spot. Stupak
asked each of them whether he would at least commit his company to
immediately stop rescissions except where they could show ‘intentional

“The answer from all three executives: ‘No.”

For those of you not versed in the details of medical underwriting, let me explain a few things.

Lying on your health insurance application is fraud
and you can lose your insurance when you intentionally do it to gain
coverage. That is good policy and basic to contract law. An example
would be someone who went to the doctor because of severe headaches,
didn’t disclose it when applying for insurance, and a short time after
getting coverage was diagnosed with a brain tumor. Common sense would
tell you not to withhold such information—particularly when the
application makes you attest that you have revealed all.

sometimes people forget to put things down. Let’s say you went to the
doctor for a back problem onetime five years ago, didn’t put it down,
and were diagnosed with diabetes a few months after your health
insurance became effective.

It would be an inadvertent and non-material misstatement
to sign your health insurance application having promised you told all
but left something, that in the end did not matter, off of it. It is
always important to be thorough and honest in filling out a health
insurance application but sometimes we forget things.

In all the years I worked for an insurer—from underwriter to COO—we never penalized anyone for an inadvertent and immaterial misstatement. I never knew of a competitor who did either.

Why would you? How could you sleep at night knowing you retroactively canceled (or rescinded) a sick person’s health insurance because of something that really didn’t matter?

forward to the California rescission controversy. A number of health
insurers have been doing just that. More, they continue to defend it
even in the face of California Insurance Department fines and plenty of

Then, they do it right in the middle of a national
health care debate the day after the President of the United States
flew to Chicago and told the American Medical Association private health insurers should have to compete with a public health plan that could well run them out of the business if it ever passed.

here they sat in front of a Congressional Committee and were asked if
they would stop retroactively canceling sick people’s health
insurance—not for real fraud but—for inadvertent non-material reasons.

Representatives of the three companies each took their turn and said, “No.”

Two things.

brought a lot of good folks into this industry over the years. People
who still need this to work so they can pay for their kids’ college
education and fund their retirement plans.

This is the kind of corporate leadership they have to rely upon so that this industry can continue?

The current health care debate turns on who can best make our system work.
My sense is that it will take the genius of individual creativity to
separate the 70% of this health care system that is the best in the
world from the 30% that is waste. Who can do the best job on that?
Government? The private sector?

I believe the private sector.

And, this is the leadership I have to defend?

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health
Policy and Marketplace Blog, where this post first appeared.

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