(Hat tip to Don McCanne). Apparently being a scummy insurance company and selling not-quite-fraudulent policies to dumb consumers is all fine and dandy—or at least legal. This is not the first or last we’ve head of this type of thing—a company called Mega Life and Health selling a cut rate policy via commission salesmen to unsuspecting punters. When something really bad happens the punter discovers that the policy is worth basically squat, and they owe $200K plus. The judge says this is America and you should have read the fine print. We all know that the best cons are the legal ones.

There’s a related category of insurers who pay out on small claims but dissapear completely when enough big ones come in. Jon Cohn’s soon to be published book will blow the lid of that bunch (I hope) so I won’t say much about them. But essentially these are all on a sliding scale from California Blue Cross cancelling coverage after the fact, to Golden Rule selling their underwritten products, to the con artists and outright fraudsters. And given the collapsing state of the employer insurance market, and the growth in desperation from people like the couple in this article, I guess it’s only a matter of time before these insurers become a bigger and bigger piece of the market and someone like United HealthGroup buys them.

And if Active Health Management is over on the Yin side of the health insurance world, these shysters are out there on the Yang end. There is a possible solution to the whole thing, but if the responsible heads in the insurer world won’t push for serious reform of their own industry, these kinds of stories will make a government run system much more likely. I suspect I’ll be saying “I told you so” in 2016 or thereabouts

CODA: I missed this at the time, but the (now fortunately dead) Shadegg bill would have aloowed the shysters at Mega and their ilk to do this everywhere, as PBS NOW reported. See the excellent transcript.

Sector Wrap: Health Insurers Fall. UNH is down $5 or close to 10% from its high on Tuesday with Allen’s conecession in VA giving the Dems the Senate being probably the clincher today.

And was I short, like I said I would be on Monday? Back then the 45 Nov puts were trading at 20 cents, today they’re 55. So how many did I load up with? (no need to add the next sentence!)

Here’s a piece from veteran SF Business Times health care reporter Chris Rauber on the Kaiser saga. I still basically stay where I was, but it’s worth noting that the presumed reason that Cliff Dodd resigned on such short notice (i.e. was canned) is not because HealthConnect (Epic) doesn’t work—it’s because the story that he was a director of the consulting company paid $1m in fees by KP while he was CIO is presumably true! That’s such a visible conflict of interest, it’s bizarre that he and the rest of the board thought they could get away with it. So I suspect that he never told them and no one bothered to ask until Justen Deal dug it out of various filings. Of course you may have your own opinions. I also just noticed that Dodd’s sole academic qualifications were that he has a BA in Sociology. I’ve got one of those (well, sort of)—perhaps they should give me the job!

However, there is no evidence that any other major EMR system works better than Epic, or is written on a more sophisticated, more modern code than MUMPS. The only real competitor in existence when the decision was made was Cerner’s Millenium—not known for its drop dead gorgeous implementations, and lacking an outpatient function at that time. The others, Soarian (Siemens), Eclipsys, McKesson did not have proven ambulatory and in-patient systems.

Why didn’t KP just buy Epic, as has been suggested? Perhaps you should ask the folks at Phillips about how easy Judy is to work with, and how willing she is to sell.

While we can all snipe from the sidelines, there is no question that getting clinicians to use process automation software of any type is really, really, hard. So I’m not surprised that this isn’t all smooth sailing.

Finally, the real scandal at Kaiser this year has not been about the IT system, or even about the pecadillos of various Kaiser executives. The real scandal has been the opaqueness of the management of the kidney transplant program’s collapse, even though that’s stayed out of the national press (beyond the LA Times and Chris Rauber’s work).

At a meeting about PR for blogging that I spoke about, Kaiser’s new press rep (didn’t catch her name) said that they were going to behave differently in the future. At least Halvorson wrote an email about this latest brou-ha-ha. We heard zip from him or TPMG about the kidney scandal.

I was going to do a post election special, but Joe Paduda beat me to it over at Managed Care Matters. I was also going to short United Healthcare, given that the Dems win will likely make it rough on those who feed at the trough of Medicare managed care. But of course I failed to do so, mostly because I’m spending all my money on putting in a  new kitchen. And of course had I done so, I’d have made out, but again for a different reason. As it turns out, the stock rallied up on Tuesday and then fell Wednesday because the company released news that its problems with the options back dating scandal would be worse than were originally thought.

But longer term, the value health plans contribute when they’re not putting their heads into the Medicare trough seems to be diminishing, and employers seem to be getting wise. If the government (or at least Henry Waxman and Pete Stark) start really asking tough questions, and if Dick Cheney is not the deciding vote in the Senate, which is looking more and more likely, well perhaps the six year bull market in health insurer stocks is over. But I’ve been saying that for a while.

On the other hand, health plans do have some potential to do good. See my podcast with Lonny Reisman of Active Health Management to see what that might be.

After being at war in several markets for the past few months (Florida and Denver come to mind) HCA has agreed a national contract with UnitedHealthcare. United has been having member retention problems in N. California, meanwhile losing a major client might have hurt HCA’s bid to go private. So someone clearly blinked here. Anyone got an idea as to who?

This medical maverick,  (or that’s what the paper’s calling him) owns three hospitals in The OC (California) and has cancelled all his HMO contacts—going after Medicare patients and charging HMOs and PPOs full fare for those admitted via the ER (and being very difficult about transferring them out).

My two questions are:

1) What happens when the HMOs won’t pay the full charge for ER and post ER care—if they feel they have to, that has very interesting anti-trust implications. Why shouldn’t all hospitals cancel their HMO contracts and just charge the Medicare rate? (at least in areas like Orange County where Medicare pays more than the HMOs do)

2) He owned a medical group that got bought by Phycor which then went bust, so that his stock was worthless. So where did the money come from to buy his helicopter and the hospitals?

Lisa Girion in the LA Times has had no small part in the story she reports today. Wellpoint’s Blue Cross unit is settling the patients’ lawsuits against its rather nasty habit of widespread retroactive cancellations. The settlement cannot have been that cheap, given that they had to pay all the bills, pony up cash and pay of their and the plaintiff’s lawyers. Still better than going before a jury, and better than having the state really throw the book at them. And they seem to be the only one that the plaintiff’s lawyers are getting anywhere with:

“All the other insurance carriers are in denial,” Shernoff said. “Blue Cross at least is not in denial anymore. They are in rehab now.”

On the other hand the statewide hospital lawsuit is still ongoing, and there are probably more fines to come from the Dept of Managed Health Care.

It is getting pretty difficult to find something nice to say about the nation’s two largest health plans. Wellpoint’s Blue Cross of California unit, already fined by the fairly tame CA Dept. of Managed Healthcare, is now being sued by California hospitals for what appears to be a general systematic cancellation of high-cost member policies. It’s worth noting that they don’t seem to be investigating the applications of those members who didn’t make any claims. Lisa Girion, on her way to health care journalistic stardom at the LA Times has more:

A class-action lawsuit filed Friday on behalf of all California hospitals accused Blue Cross of California of routinely violating state law by refusing to pay hundreds of hospitals statewide for patient care it authorized.The suit is the latest salvo in a growing controversy over actions by Blue Cross to cancel the individual health insurance of sick policyholders, sometimes saddling canceled patients with huge medical bills. Although Blue Cross contends that the cancellations are justified partly to crack down on fraud, consumer advocates and policyholders say some revocations are carried out simply as a way for Blue Cross to avoid paying expensive claims.

Larry Glasscock, the CEO of Anthem, (now Wellpoint) has been pretty quiet in the press, but Wellpoint’s pre-merger figurehead Len Schaeffer has historically not been–and it’s his side of the company that evidently was causing all the trouble. In fact as I’ve pointed out here before, although Schaeffer accurately understands what the problems in health care are (practice variation and a lack of IT use) the solutions he used over the years don’t solve those problems, but instead relied on better risk selection and more aggressive pricing to make Wellpoint very profitable. What exactly was his "value-add" to society for all that money he "earned".

But of course in the lexicon of earners he’s a chump compared to Bill McGuire at UnitedHealth Group. It does appear though that McGuire may be fired by Monday as an external investigation suggests that the stock options he received were all illegally backdated. Whether or not it was illegal, his actions suggest staggering greed. He already had wealth beyond anyone’s imagination. What exactly was the point in cooking the books and effectively stealing from shareholders to add more?

I guess with the amount of sycophants he surrounded himself with, like these ones quote in the WSJ he really felt he was worth every penny of the $1.6 billion, or whatever:

"We’re so lucky to have Bill," Ms. Mundinger, a longtime
compensation-committee member, told the Journal earlier this year. Of his rising
pay, she said: "He needs to be compensated appropriately so that his business
model has believability in the market."

It wouldn’t be quite so bad if the bulk of these profits and vast riches were made back in the 1990s. At least then health plans were acting as what Uwe Reinhardt used to call "bounty hunters" and saw their mission as removing the excess earnings of hospitals and specialists, even if they were redirecting some of them to their executives. But at least Malik Hassan (Healthnet) and Len Abramson (US Healthcare) were clearly going after the providers and were delivering lower rates of premium growth (and in some years negative growth) to their customers, the big employers.

But in the past six to seven years, that has all changed. The health insurers have completely given up trying to figure out how to lower costs, and have just stuck big increases onto their customers. What’s worse is that as overall premiums and costs have gone up, the share that the insurers have kept has increased! Thus, they are screwing their customers, and at the same time keeping a bigger share of larger revenues–which has resulted in those huge profits and stock option gains.

And even worse, they’ve all got heavily into the business of destroying what was left of the risk pool by providing high-deductible highly underwritten plans such as Tonik (Wellpoint), or even worse buying scumbag quasi-fraudulent plans such as Rooney’s Golden Rule (United).

I know that the employers and taxpayers are dumb, but that doesn’t mean it’s been a good thing for McGuire, Schaeffer et al to take advantage of them.

There are obviously talented and good people working in many parts of health plans, as I’ve documented elsewhere. Several major innovations have come from within them, particularly in population and disease management. But recently the people in the executive suites have shamed their organizations and harmed not only their industry, but the health care system and society as a whole.

And, eventually, that will mean that when time comes to make an argument in favor of why we should have a private sector health care insurance industry, the rational moderate voices in support of some role for health insurance intermediaries–of whom barely count myself as one– will be that much weaker.

UPDATE: McGuire is indeed gone. What happens to his $1.6bn of in the money vested options is less clear. Wall Street doesn’t seem to care–the stock is flat today.