By Matthew Holt

In the same vein as Wyden’s speech to AHIP yesterday, this is the talk I gave to the Western Regional Conference (a group of Blues plans) on October 14, 2007.

Hello my name is Matthew Holt and I’m here to tell you the truth. Now I know that you are a bunch of senior executives at health insurance companies, so you may not be very used to that….

I also understand that the person I’m replacing as a speaker here is Governor Arnold Schwarzenegger, who starred in some famous movies involving the end of the world and invasions by aliens, predators and terminators–something which might seem metaphorical to you after you’ve heard my talk.

I’m here today to tell you three potentially inconvenient truths.

First, you’ve done very, very well for the past several years. But the chances that you will be able to keep running your businesses in the same manner in a decade or so are very low. In fact if you keep running your businesses the same way the chances are good that you won’t be in business. That may not matter to those of you close to retirement, but it probably does matter to everybody else.

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By Matthew Holt

Just for Friday, no Health 2.0 stuff. Instead two speeches, one by Oregon Senator Ron Wyden (D) last week to AHIP. The other from me to the Western Blues meeting late last year. This is Wyden’s

In less than a year, America will watch a new president be sworn into office, and exactly one year from now that new president will be on day 44 of his/her first 100 days – their so-called “honeymoon” with the public.  I don’t think that I have to tell you, that for the cause of health care reform, those 100 day will be very important. I believe, however, that the success of health care reform hinges to a great extent on how your profession responds to the efforts of a new president and a new Congress.

If your profession decides – as it did in 1993 and 1994 – to go out and spend millions of dollars fighting to preserve the status quo, you may delay reform for awhile but you will increase the likelihood of a government run health system with no role for the private sector.

So, this morning, I’m going to make the case for your taking a different approach.  I’m going to make the case why a fundamentally different private health insurance market would be good not only for the American people but also for the many responsible persons who work in the private health insurance industry.  Many of whom are in this room today.

I don’t have to remind you what the public opinion is of the private health insurance industry.  It’s not just “Sicko,” Denzel Washington movies and Los Angeles Times investigative reports.   Lots of presidential candidates can tell you that the easiest way to win applause is to “go negative” on private health insurance.

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On Thursday HealthNet was being sued by the LA City attorney’s office and saying that it was doing nothing wrong and would keep on trucking:

Health Net’s Olson said the company’s application had been approved by regulators and didn’t need to be changed.”There are 110,000 Californians who figured it out and were able to fill out the application in a way that got them low-cost, high-quality coverage,” he said. “It’s fine and it’s working.”

Presumably they had faith that the arbitration process that many health plan policyholders have to go through would mitigate any risk.

What a difference a day makes.

Friday, the arbitrator in the case of the cancer patient whose insurance was retroactively terminated—this was the case which revealed the bonuses paid to staff who cancelled policies— awarded $9 million in punitive damages to the patient. This isn’t quite the $89 million that was awarded against HealthNet in 1993 in the Fox-Hipple case, but the difference is that in arbitration there’s usually no appeal (that $67m was never paid in full).

Jay Gellert, HealthNet’s CEO immediately announced that they would stop retroactive cancellations. But of course with lawyer William Shernoff now smelling blood, and with Blue Shield still fighting for the “right to recission” in the courts, the damage isn’t over.

Hopefully this will eventually mean that the companies will accept real regulation and real reform in the individual market, which essentially means ending it. 

(FD I am a HealthNet individual policy holder and they haven’t “recivved” me yet. Then again I haven’t had a claim in 3 years!)

In the latest fall out over health plans behaving badly, the City of Los Angeles is suing Healthnet about its policy of paying bonuses to staff for cancellations.

The suit alleges that Health Net sold at least 100,000 individuals policies over the last four years. If the city attorney proved that each policy was falsely advertised and vulnerable to an unfair cancellation — and if the maximum penalty was assessed in each case — the company’s liability could run into the hundreds of millions of dollars, sources close to the investigation have concluded.

Healthnet isn’t sounding too contrite, though. 

Health Net’s Olson said the company’s application had been approved by regulators and didn’t need to be changed.”There are 110,000 Californians who figured it out and were able to fill out the application in a way that got them low-cost, high-quality coverage,” he said. “It’s fine and it’s working.”

This might be my proudest moment in blogging. Anyone can be ahead of the WSJ by 5 years. But on THCB I connected the dots between LA Times coverage of the dumb public relations of Wellpoint in California, and New York AG Andrew Cuomo’s assault on UnitedHealth Group yesterday afternoon.

That’s at least 6 hours (maybe 7) before Lisa Girion did it in the LA Times. I emailed Lisa to crow about it this morning…..of course she’s probably too busy being the de facto head of health insurance reform in California — and now the US — to email back, admit defeat and come work on THCB instead!

Being serious for one second, Lisa’s work in exposing the behavior of health insurers may be the most important series of work in health care journalism in the last few years—even more so than the series which exposed the problems at King-Drew and Walter Reed. There’s no question in my mind that it will lead to significant legislation which will go some way to cleaning up the health insurance industry.

And it’s not as if Lisa was mailing this in. She found the recission (retroactive insurance cancellation) stories herself, she did the digging in the courts, and she got what at first blush sounds like a very unsexy type of story to be a major issue in California’s most important paper day after day.

To my mind she’s become a national treasure and I hope that the powers-that-be at the NY Times or perhaps Pro Publica are paying attention!

First, 24 hours after being shamed in the LA Times, Wellpoint has backed down on getting docs to check up on whether their patients should have their insurance recisionned (is that a word?). It’s good to know that someone’s setting insurance policy in this country even if perhaps Lisa Girion wasn’t actually elected to the job!

Then it gets announced that the AG of New York state (traditionally a post filled by a  kick-ass hungry Democrat, these days Andrew Cuomo) is going after UnitedHealth sub Ingenix and a whole raft of insurers it works with on price fixing/reimbursement rate manipulation. What particular part of a health plan’s business practices Cuomo is going after it’s hard to tell. There’s usually plenty of choice!

But it is clear that if anything gets done about health care in the next cycle, insurers are front and center in the politicians sights.

And if you think this is just me talking, check out libertarian Arnold Kling, who for some strange reason manages to get his stuff on the op-ed pages of the WSJ. He basically agrees with me.

You’d think the folks at Blue Cross of California or in their parent corporation in Indianapolis would have heard of Lisa Girion of the LA Times by now. Do they really think that by compounding the PR disaster they had with the recission stories of last year their public image is going to be helped by sending their prospective members’ applications to doctors and asking them to check them?

Health plans already ask doctors for medical records of their patients. And that’s a big enough pain as it is. Now it’s apparent that they’re asking them to check the forms of new enrollees. Their explanation that it’s for the good of the medical groups taking capitation probably doesn’t wash, as it’s probably the patient’s previous medical group which has the relevant information. Here’s the through the looking glass story from Lisa Girion at the LA Times.

My only assumption is that Wellpoint has decided that it can get away with basically anything and is desperate to make hay while the sun shines. After all no corporation can get away which such silly behavior for ever.

In one of the many newsletters I diligently peruse so that you don’t have to be contaminated directly I read this. Astonishing, even considering the source.

I had a terrific opportunity to speak to 700 health insurance agents and brokers on Tuesday morning, here for the Capitol Conference of the National Association of Health Underwriters, most ably led by CEO Janet Trautwein. These people are entrepreneurs who are on the front lines of saving the private market for health insurance in this country, and they are my heroes.

So who is it who thinks that this country’s health care heroes are the insurance brokers and underwriters who are in fact just waste motion making money off our dysfunctional insurance system? Answers/guesses in the comments please…..

CODA: I was actually speaking at a PRI event last year and met an insurance broker who explained to me that he was giving wonderful service to his clients. I with a hint of cynicism asked him what he meant and he said that he was helping them navigate the health care system, finding them the right doctors and negotiating with hospitals for them. I pointed out that those were the functions of a health advocate not a traditional insurance broker. He agreed. Hmmm…I said so you want to move your business from commission based insurance sales to fee-based consumer advocacy, and he told me that he had even been discussing this with Sheila Kheul (the main proponent of single payer in California) as a potential role for brokers in a single payer world.  How many health advocates like you do you think we need in California, I said. About 2-3,00 he said. How many health insurance brokers and underwriters are there in California I asked. About 50,000 he said.

That leads to me thinking that this bunch isn’t going quietly into the night….but then again they’re "heroes"

After last Fall’s FBI raid the top management at Wellcare resigned on Friday. The board is hoping that the new CEO, former United executive Charles Berg, will right the ship. After all who could we trust more than the WellCare board to guarantee that the taxpayer and patients will have their affairs conducted in proper and decent order. Because there’s no chance that anyone on the WellCare board has ever taken advantage of their position in order to simply cash in, oh wait….

Well then surely there’s no chance that the three senior execs who resigned are the three who also sold millions in stock a few months before the FBI raids, is there? Oh it was them? That’s a surprise–and what about that other board member who also cashed in big time?

I guess I’ll check the comments section on this post to get Reggie’s  explanation…

There’s been a lot of discussion about a potential health care score a la FICO score. The right way to do this would be some way to reward providers/plans whomever for doing whatever it takes to improve a population’s overall health. Plans/providers which improve a risk adjusted set of health outcomes would do well, and those that didn’t would not.

The wrong way would be to use the score to discriminate against sick people–by refusing them service before they have to chance to run up a bill they can’t pay.

Guess which appears to be being developed by Healthcare Analytics, a company that has as investors Fair  Issac–the company behind the FICO credit rating–and long time problematic for-profit hospital operator Tenet?

Now of course they may not be developing anything of the sort. Maybe it’s just a tool to help hospitals figure out what proportion of their bills are likely to get paid. But in that case why raise $30m in VC?

But you want to know how this will be perceived by the public? Try reading the 2000+ comments on this posting since last Friday! You can guess the reaction without reading the comments.

Healthcare Analytics had better get out there talking about what it’s really doing very quickly, or a whole lot of other people will be filling in the gaps for it. You might have noticed that the country’s mood right now is not very friendly towards corporate greed and bad behavior–and that will get worse as the coming recession deepens.