Matthew Holt

More bad press for Insurers. Will anyone care?

Jon Cohn notes that Wendell Potter, a former PR executive with Cigna and Humana. will be appearing before a Senate Commerce Committee today. Note the word “former”.

Trudy Lieberman has an interview with Potter where he repeats what we already know:

Lieberman: How do companies manipulate the medical loss ratio?Potter: They look at expensive claims of workers in small businesses who are insured by the company, and the claims of people in the individual market. If an employer-customer has an employee or two who has a chronic illness or needs expensive care, the claims for the employee will likely trigger a review. Common industry practice is to increase premiums so high that when such accounts come up for renewal, the employer has no choice but to reduce benefits, shop for another carrier, or stop offering benefits entirely. More and more have opted for the last alternative.

Lieberman: What tactics do they use in the individual market?Potter: They rescind policies when a review indicates that an individual has filed a lot of expensive claims. They will look for conditions that were not disclosed on the application. Often the policy likely will be canceled and the individual left without coverage. Sometimes people aren’t aware that they have a pre-existing condition. It might be listed in the doctor’s notes but not discussed with the patient.

Lieberman: One way to end this practice might be to regulate it out of existence. Can we count on the industry to submit to more stringent regulation?Potter: The industry says it will accept more regulation, but the evidence is that it flaunts regulation on the books now. Insurers are often cited for violations of many state regulations, and they usually agree to settle with insurance commissioners or the attorney general and pay a fine. Fines are the cost of doing business, and even if the fine is several million dollars, it is inconsequential compared to profits insurers make.

Last week there was a Congressional hearing on recissions that Bob L noticed, Lisa Girion noticed, Karen Tumulty at Time noticed, even Paul Begala noticed and which the rest of America’s media (including the NY Times for which I could not find ONE mention of the word recission in a search for the last 12 months) ignored. But it essentially showed that in the absence of serious regulatory change AND enforcement, plans will continue to behave badly/maximize their self-interest. And screw over insurees.

The real question is whether the Wellpoints and Humanas of the world will behave well if we get the regulatory change we need—and that’s a huge if. Or if the for-profit nature of their DNA means that we need a wholly different structure of plan. And yes, I’m not a single payer advocate, as I am in favor of intermediaries between the universal insurance pool and providers. But I tend to think that cooperatives would be better for that than large health insurers, although I’m not sure we can all move to Seattle!

But aside from Assurant, Golden Rule & Tonik (who are not even saying the right thing), it’s clear that the majority of health plans are saying one thing about the future they want and doing another to maximize profits in the present they’re in. The question really though is, why aren’t we hearing more about how bad they’ve been?

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20 replies »

  1. Logan,
    Your an ass, the only question is are you an ass because of the faulty assumptions you make or your just generally one all the time?
    I make my living helping employers reduce the premium they pay to insurance companies so they can afford to offer benefits or continue to offer better benefits. By paying less money to the insurance carrier they can spend more of it on actual healthcare. I cut premiums 30-50% and reduce overall health cost 10-20%. How exactly is that screwing anyone over. Well I am sorta screwing the insurance company is that what bothers you? Yes you do look pretty stupid now.
    Actually Peter’s is a sob story, any time you get one side of the story your listening to a sob story. When your presented with all the facts and both sides then you have an actual occurance.
    You don’t seem to comprehend that over 90% of clean claims are paid, only a small fraction of claims are denied for reasons besides duplicate, not eligibile, or not identafible. But hey why let facts slow you down.
    I love how when challenged you change and reword all your comments. Members usually don’t pay the bill while they appeal, they wait until it is setteled.
    HMOs have 20-30% market share, smaller then PPO market share. The poor in Medicaid are more likely to be in HMOs and anyone in the middle of the country and outside large cities almost certainly have a PPO. Again you are clueless.
    Again you are clueless and apparently never heard of small group reform. Most if not all states have limits on how much rates can increase. In CA it’s .9 to 1.1 again disproving your statement.
    Name one person sent to jail for insurance fraud. I can name hundreds who lied on their apps to get coverage and not one has ever seen the inside of a jail.

  2. Nate, there isn’t a doubt in my mind that you sell or adjust insurance for a living. Which don’t get me wrong, in our current society it’s a necessity, but I couldn’t spend my life screwing others over, sadly it’s not in my nature.
    1) They may have not come up with it, but at least in most cases, they have complete control of the process. (Take a look at Peter’s quip) an actual occurrence, not hypothetical “sob story”.
    2) Appeals might not have fees involved; but time is money. Maybe the situation would be better if when you are selling someone insurance you tell them up front:
    “Just an FYI, we are going to deny all your claims no matter what the reason, so please familiarize yourself with our appeals process.”
    3) Of course they are accepted, but in actuality how long does it take? So the insured covers the costs initially and waits months for the appeal to be processed. Now they are currently in debt for thousands upon thousands of dollars that they shouldn’t have had to pay in the first place….
    Yah…. that sounds like a working process to me.
    4) Last time I checked; Millions still encompasses billions, and to be honest I was making a generalization based on one company; not Health Insurers as a whole across the nation.
    5) You are correct, the scenario is not likely to happen at all, the issue is that it could happen, and it shouldn’t be possible, ever.
    6) Unless you are at least of the middle class you do not have a PPO, you are on an HMO, no exceptions. It must be nice to be as well off as you.
    7) They may not be able to drop the individual or family as whole; but they can surely make the company find a new provider (upon the next yearly enrollment).
    The policy’s can be adjusted to the point where it becomes too expensive or 100% useless to the insurer, and by having a major claim such as this (depending on the size of the company) could adjust the rates for all employees.
    8) Not really sure what you are referring to here, but if it’s the quip on the uninsurable son, you’ve made some leaps and bounds to get to that conclusion.
    There is very little difference between being actually uninsurable and being insurable but not being able to afford the high premiums, and frankly; they are the same thing.
    I’m sure you’ve never had to face the choice that some American do on a regular basis: “do we eat this month or do we pay our health insurance bill?” That’s a really hard decision to make when living paycheck to paycheck.
    9) Hypothetical situation, as I said, you are correct, it is very unlikely to happen, but the mere possibility of it occurring is just cause enough for change in the system.
    How about something that happens all the time, Insurance companies claiming procedures, medications, etc.. are elective and not covering them even with the recommendation from a doctor. If you want another example read Peter’s above.
    10) “10. Denial of a valid claim is illegal under contract law, state law, and possibly federal law. Insurance companies get sued for this all the time. They usually win but by no means is it legal like you say.”
    I did not mean to imply that it was legal, what I stated that these denials are a smart business decision in the eyes of the law, sorry if you misunderstood but that means that it is cheaper for them to deal with the legal issues than it is to pay out the claim. This is just sleazy business practice.
    And what happens if they lose in court over these claims? They pay a fine for the violation, they pay the claim being litigated about, (and maybe some damages if the plaintiff is super lucky). Then they continue to do the EXACT SAME THING over and over again, because it is cheaper for them to do so.
    What happens if you get caught committing fraud against an insurance company? You got to jail… Don’t you just love the double edged sword for culpability? If you act alone of course you are culpable, if a company act, nobody is culpable… Fun times in America.
    And you are right again, one of the main problems is people not understanding their policy, but again this is done ON PURPOSE by the insurance company so that the average working class person is unable to understand it without an attorney. How many File Clerks do you know that can afford an attorney?
    The problem isn’t that Insurance doesn’t work, the problem is it only works for a percentage of the population. Health Insurance should be like Public School, EVERYONE should have access to it.
    You are profitting from misery and death, feel proud.
    Why not just enlist in the army go for a more direct approach, then you can cut out the annoying paperwork portion of your killing.

  3. Logan,
    Please take note of your following mistakes;
    1. The appeals system came out of ERISA and the courts, the carriers had no hand in designing it and at the time did not care for it at all. ERISA is the only insurance law that holds plan fiduciaries personally responsible and can send them to jail, that was not of their writing.
    2. Appeals process cost no money except the time to write a one paragraph cover letter.
    3. By law all appeals are accepted, some are still denied but they are all reviewed.
    4. Fraud does not cost millions it cost tens to hundreds of billions, YEARLY
    5. Your “scenario” has about a one in one million chance of happening. You refer to him being covered by a policy through work, employers benefits are subject to HIPAA which almost completely eliminated pre-ex. Further if they where one of the few people that had pre-ex they would have known when they enrolled and couldn’t provide proof of creditable coverage.
    6. In most cases you would still get the PPO discount so it would be a fraction of that amount.
    7. Your item 2 is 100% false. The carrier can not drop individuals in a company policy nor can they drop family members because of other family member claims. There is no possible way for this to happen as you say.
    8. Again 100% false, I strongly suggest you read up on HIPAA before commenting on insurance again.
    9. When you show me a verified case of someone being rejected for pre-ex they didn’t know about I’ll believe that one, it’s an urban myth.
    10. Denial of a valid claim is illegal under contract law, state law, and possibly federal law. Insurance companies get sued for this all the time. They usually win but by no means is it legal like you say.
    Ignorance is far more detrimental to individuals health then insurance companies. People need to spend less time reading BS sob stories and getting all worked up over things that could never happen and read their actual policy. That alone would solve most denied claims.

  4. I was advised prior to getting treatment by BCBS rep that BCBS would pay the claim. The phone conversation was recorded and on file. On submitting the receipts and fighting with BCBS for six months to pay (you don’t want to hear the whole story about repeated lost records having to be refiled and my letters to the insurance commissioner), they partially paid. The appeal was to get them to honor the phone advice I was given. The amount was not large and not a big deal, but they went back on their word. I learned that insurance companies have the power to frustrate the process in an attempt to wear you down. After that I cancelled with BCBS and now self insure.

  5. Peter;
    Out of curiousity and if you don’t mind me asking.
    What was the reason your claim was denied, and what was the reason it was denied again on appeal?

  6. “First, in response to Actuary and his/her allusion to the appeals system: The Appeals system that you speak about is basically in place as a request by the insurance companies. It gives them much more of an opportunity to deny claims outright because they have this appeal system in place.”
    Logan, you are right that the denial of claims comes first, without review and you are still required to pay the provider even though the claim is in dispute. In NC
    you have a right to appeal BCBS decisions (and probably any carrier) to a “independent” review panel. I did that for a small $1700 claim. Turned out the review panel was paid by BCBS and were insurance industry insiders – needless to say my appeal was denied. How’s that for a jury of your peers, well at least BCBS’s peers. These review systems are designed by insurers for insurers.

  7. I found this back and forth to be quite honest and truthful from both sides; we see an outlook from an insurer and the insured. But I would like to point out few things that sparked my attention.
    First, in response to Actuary and his/her allusion to the appeals system: The Appeals system that you speak about is basically in place as a request by the insurance companies. It gives them much more of an opportunity to deny claims outright because they have this appeal system in place. The main issue is (which the insurance companies count on) is that the appeals process will be more time consuming and sometimes even cost the individual more money to take care of, and then there is no guarantee that it will be accepted.
    The WHOLE idea is to make the process too hard for the individual so that they just end up giving up….
    One more thing I wanted to touch base on was the topic Fraud.
    I agree 100% that fraud is a huge problem; people feel as if they should be able to take advantage of the “big bag insurance company” People falsifying claims, doctor’s fraud, and other issues cause the companies millions. Personally though; I like to think about it this way:
    Say you are a single Father of three, trying to make ends meat at a job that doesn’t supply full employee coverage, so you’re out of pocket expense a month for coverage is $400.00 (which is conservative for a family of four).
    Now lets say, god forbid, one of your 3 kids becomes quite ill and is taken to the ER for and stays in the Hospital for 4 days. We all know how expensive hospital stays are (At Least 10,000 a night, depending on location).
    So you’ve now racked up about $40,000 in hospital feeds plus let’s say another $5000 in tests and other unforeseen fees.
    You THOUGHT you had good and fair coverage that would take care of most of this, but after the insurer reviews your claim, they decide that it was a pre-existing condition that caused your son to be admitted to the hospital, and they deny it outright, let’s see what you are left with.
    1) $45,000.00 Bill From the Hospital
    2) Now nobody in your family is insured because after this claim; they will surely drop you.
    3) Your Son has a black mark on his medical records and will basically be uninsurable for the remainder of his life.
    4) you MIGHT have the insurance company seeking Fraud charges against you because you didn’t disclose the pre-existing condition on your application the first place (even if you didn’t know about it)
    So now you are in debt for more than your yearly salary, you have no medical insurance for yourself, or for your kids so even a strep throat diagnosis and prescription will be too expensive to buy, not only that but you could be spending some time in jail…
    So… What happens to the insurance company if they commit fraud, or fraud as the individual would see it? The Denial of Claims without a truly valid or legal reason in the eyes of the law is considered a smart business decision… and if they are caught, they might pay a small fine…
    Personally; I say we start arresting the executives on Man Slaughter charges for all of the people that died due to falsely denied claims that would at least let them know we mean business.
    These “Fines” that are dished out are completely meaningless, and you know why? Because Insurance companies account for them in their yearly budgets; and determine up front what would be cheaper, paying the claims vs. Fines and Lawsuits… guess what wins out more often than not?
    But we live in a society that caters to the Haves instead of the Have nots; so nothing like the above will ever happen since the Executive at the insurance companies has AT LEAST 1 Senator and 2 Congressmen in his pocket… Don’t you just love this country?
    Capitalism has it’s perks; but there is no reason for people to be dieing or suffering purely for greed in this country. But a las that’s the American way, get rich anyway you can and as fast as you can; but please please make sure you screw over as many others on your way to the top!
    If you pay taxes you should have health insurance. PERIOD.

  8. JD, I don’t believe anyone thinks that reducing executive pay/bonuses will make a noticable dent in healthcare costs, but they are a symptom of the larger problem of who healthcare executives should be accountbale to. When people are increasingly loosing insurance, having to take more of their income to pay for coverage, not being able to pay deductibles, and going bankrupt from medical expenses, all while premiums and costs keep rising while their salaries are stagnant or being cut AND they see healthcare executives getting richer and richer, they are understandably angry and rightly smell a rat. If people can justify healthcare executives’ compensation do those same people also defend Wall Street bonuses by the firms that brought the economy to near collaspe through the same kind of legal greed and mismanagement? Do they also approve of continued bonuses to executives receiving taxpayer bailout money. Surely giving up those bonuses and high pay checks would also not have made a dent in saving the economy, but they would have sent a signal that somehow we’re all in this together and we’re all going to find a way to fix it, and I’m not going to get rich off your hardship.
    How’s this for executive bonuses; they get a bonus tied to the amount of premium they cut and the amount of health costs to the patient they reduce. I’d gladly pay that.

  9. A few points:
    1) The tactics Potter is talking about in the small group market are possible only in states that don’t have community rating for small groups. If you want to solve them, you don’t need a public payer or single payer, you just need community rating. There is simply no way to selectively raise rates to push a company away. That is not a rule you can get sneaky about. I work for an insurer in such a state, New York, and there are downsides to it when there is no mandate for coverage, but it is far preferable to experience-rating small groups from public policy perspective with the right mandates.
    2) Of course rescission on grounds other than fraud should be banned now. Rescission on almost any grounds should be banned once a serious mandate for coverage is in place to prevent people gaming the system. If you don’t think that is something to worry about, check out Massachusetts, where it is already happening. Charlie Baker has an important post on this: http://www.letstalkhealthcare.org/ma-health-reform/a-costly-wrinkle-in-the-merged-market/
    3) When Potter says that insurers will fight to the death to keep flexibility in benefit design (“in other words, low-cost policies that don’t cover very much”) keep in mind that he was with Humana and CIGNA. These are two of the three most aggressive true-believers in consumer-directed care, along with United. Don’t assume the rest of the industry feels as strongly as they do. There are plenty of insurers who have moved reluctantly into lower benefit plans because they had to in order to compete with the plans that are aggressive about it. Think about this for a moment, why would all insurers “want to have the flexibility to continue designing plans that cover less and move further and further away from the concept of insurance to personal responsibility?” The less insurers insure, the lower the premium and the lower the revenue. Who cares if the profit margin moves up from 4% to 6%, when the revenue goes down 30%??? A company like CIGNA that focuses primarily on self-insured business can make money this way because it isn’t at risk for most of its business in the first place, and whether a company pays 90% of a claim or 70%, CIGNA gets to charge the same fee for processing it (not only that, it gets to charge more to manage the HSA and HRA accounts).
    4) As I’ve written here before, do not underestimate the importance of ideology. There are conservatives at the helm of some companies, and conservative cultures, that worship at the altar of free markets (except when they want favors) and personal responsibility as a cure-all. Part of the push for so-called consumer-directed products comes out of a desire to undercut and out-underwrite the stodgier local Blues and traditional HMOs, but part of it also comes from ideology that lets them believe they are doing the right thing and gives them a strength of conviction that ignores basic facts about how richer benefit designs yield higher revenues and are compatible with medical cost controls with the right enabling legislation (I wish the focus would be here more than it is). But not all companies and company cultures are alike in the insurance industry.
    5) I agree 100% with Potter’s closing statement: “[Journalists] should be looking at what insurers, drug companies, and organized medicine said during earlier reform efforts, and then report on how well they’ve delivered on those promises. Instead of just reporting costs estimates from the Congressional Budget Office about how much a certain plan will cost taxpayers, which is easy to do, they should write investigative and analytical pieces on the costs to society and the economy if reform is not enacted. Is reform an expense we can’t afford, or an investment we can’t afford not to make?”
    6) Profits do NOT matter for insurers in the way that most people seem to think they do. As Nate and I keep pointing out, health insurer profits and executive pay are very small as a percent of total health care expenditure. If you were magically able to remove all of it, you might not save a single person from banktrupcy from medical costs. If a $100,000 bill is reduced to $99,000, it doesn’t change much. Where profits do matter is in the mentality created by the pursuit of them. When profit is king and the service is just what you have to do to get the profit, that is a problem. This is not just a problem for insurers, and it is not just a problem for for-profit companies. It is a pervasive problem in health care. Partly this is because health care should be mission-driven in a way that TV manufacture is not. Partly this is because purchasers are in such a poor position to effectively choose higher quality, lower cost “products” in health care, thus disciplining the profit-seeking companies. There is little discipline coming from the buyers of care (individuals, companies, government) for reasons that have been discussed here many times.

  10. Insurance companies occasionally get fined and the left blows it into a daily occurrence. How many insured that knowingly submitted false information have been tried in that time? Have you Matt or anyone on the left every once written about that happening? Why not, for every person that insurance companies rescind thousands lied on their apps to get the policy? Consumer fraud is far more common and you completely ignore it, when the evil insurance companies try to protect themselves from rampant fraud the government ignores you make them the villain. If the law was enforced and the left didn’t accept such fraud there would be no need to rescind. Ideally an insurance company rather someone who lied be arrested and tried in court and the court finding them guilty so they could cancel the policy with no possible repercussions. This is impossible when law enforcement REFUSES to enforce the law no matter how egregious.
    If you read you would know Potter is full of BS and lying his ass off. Only a buffoon who has never seen an underwriting manual would believe him, i.e. your elected representatives. Underwriting is automated, they review the apps and every condition or answer is given a set amount of points. Add up the number of points at the end and it equates to a rate, then adjust for age, sex, and location and your rates are set. There is no manipulation and this is a highly regulated process. Lieberman and Potter couldn’t even collude to get their questions and answers right. Lieberman ask about medical loss ratio which is a retrospective comparison of collected premium to paid claims. Potter answers with renewal rate calculation procedures, they are completely different numbers, one looking at the past the other the future. How do you people keep falling for this garbage?
    “Insurers are often cited”
    Once every 4-5 years is often? Notice how the left never gives actual numbers just terrible subjective adjectives?
    “Common industry practice is to increase premiums so high”
    In CA they rate between .9 and 1.1 so the max increase could be 20% is that what he is talking about? If a group has 1000% loss ratio what should the carrier do just eat the lose? Or charge other employers more to cover the large claims of the sick group? If you’re a healthy group though why would you pay more to cover a sick group when you can just switch to a new carrier? When a group does have large claims and sticks the carrier with considerable loses are they required to stay around when they get healthy again? Of course not as soon as another carrier will take them at lower rates they bail.
    See how easy it is to be shocked and offended when you bury your head in the sand? Explain to everyone how you expect a for profit, non profit, or public plan to stay in business when clients are free to move for cheaper rates when ever they want but carriers are required to subsidize their bad years. I’ll go out on a limb and bet you don’t have any answers for it. Like our President you enjoy dreaming and promising results with no thought how to actually accomplish them. And gladly believe every snake oil salesman you meet on the way.

  11. Gee John, would you consider a mafia capo who “rats”(whistleblows) on his fellow mobsters one who “betrays”, (for gain) his former employers? You comment as if the actions by Cigna Humana are ethically justifiable – I guess they would be on Fox News.
    Whatever you write to justify recissions has nothing to do with healthcare, just insurance profits. In a public system NO recissions would need to occur.
    And John, if Medicare and Medicaid generate $600 billion in waste, how much do for profit systems create?

  12. It’s easy to find a “whistleblower” to betray his former employers for political gain. I’m sure we’ll see a lot more of this over the summer to keep the momentum for a government take-over moving. I’ve written a lot about the California rescissions over at http://www.statehousecall.org.

  13. Actuary, it doesn’t matter which year you look at:
    http://www.newsobserver.com/business/story/549291.html
    http://www.wral.com/news/local/wral_investigates/story/4668082/
    You can also read this to see how our legislators deal with BCBS as well as an opinion on “profit margin”:
    http://pulse.ncpolicywatch.org/2009/03/18/blue-cross-takes-state-to-the-cleaners-in-contract/
    Do a search on political donations to NC legislators by BCBS executives to see how the system is skewed.
    Would for profit hospitals low profit margins then negate the 6 figure incomes by docs?
    I don’t think you can hide multi-million dollar bonuses behind low profit margins when everyone is having trouble just maintaining coverage – it’s the let them eat cake senario. I’ll bet Madoff’s take was a very small percentage of Wall Street profits or number of trades or any comparison you want to make it look insignificant.

  14. Peter,
    The independent authority is picked by the IL Department of Insurance, which uses physicians. You missed the point, which is that very rarely does anyone even file an appeal.
    The link (2005, not very current) you gave also helps. Let’s say all health insurance execs combined make $100 million/yr, that is .004% (4 cents of every $1,000 spent) of total health care spending.

  15. Profits or rationing, that is the choice. For now, I prefer profits. At least I’ll still have an option to access coverage in a free system. Who is really going to pay in the proposed Senate health care bill? College educated, professional, small business owner types. (See: http://www.mccarthystevenot.com/2009/06/19/who-pays-in-the-senate-health-care-bill/ ). Hammer the insurers all you want, I’m still not convinced a government plan would be a better alternative. Perhaps more regulation in terms of underwriting and fewer penalties for pre-existing conditions – but a government plan? See page 70 of the proposed Senate health care bill ( http://help.senate.gov/BAI09A84xml.pdf )and read the groundwork for future health care rationing.
    Reform is needed but the proposed legislation misses the mark by a mile – not to mention still leaving 30 million uninsured (according to the CBO estimates)!
    This has all been way too rushed. Health care reform needs more study before we ready-fire-aim on this subject!

  16. The dishonesty is in taking the rare exception and presenting it as the rule.
    News flash: the hospitals are for profit, and the doctors are averaging six figures.
    The profit level of all health insurance companies combined, let’s say $12 billion/yr is about .5% of the 2.4 trillion spent on health care.
    What about the myth that insurers are “always” denying care, as apparantly believed by this complete fool “pulmonmale”?
    Interesting example from Crain’s Chicago Business:
    For HMOs in IL, there is a mechanism whereby an insured who has a claim denied can appeal to an independent authority.
    Here are the 2007 statistics:
    Total # of HMO IL members 1.43 million
    Total number of appeals filed 69
    Total number of appeasl overturned 14
    So Holt and his ilk will present the 14 cases and harp on the “Big, Bad Insurance Companies”.

  17. Off with their heads. Get rid of these inflation causing, care disrupting, doctor disturbing, patient manipulating, medicine denying, slow death favoring, dishonest and lying beasts.

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