MY TIMES/Insurance Company Schemes
Congressional committees heard a lot this month about the devious schemes used by health insurance companies to drop or shortchange sick patients. It was a damning portrait — and one Americans know from painful personal experience — of an industry that all too often puts profits ahead of patients.
As health care reform moves forward, Congress must impose tighter regulation of companies that clearly are not doing enough to regulate themselves. Creating a public plan could also help restrain the worst practices, by providing competition and an alternative.
A House oversight subcommittee took a close look at a particularly shameful practice known as “rescission,” in which insurance companies cancel coverage for some sick policyholders rather than pay an expensive claim. The companies contend that rescissions are rare. But Congressional investigators found that three big insurers canceled about 20,000 individual policies over a five-year period — allowing them to avoid paying more than $300 million in medical claims.
The companies typically argue that the policyholders withheld information about pre-existing conditions that would have disqualified them from coverage. But the subcommittee unearthed cases where the pre-existing conditions were trivial, or unrelated to the claim, or not known to the patient. When executives for the three companies were asked if they would be willing to limit rescissions to cases where the policyholder deliberately lied on an application form, all said they would not. This tactic will not be ended voluntarily.
Meanwhile, the Senate Commerce Committee was getting an earful from a former head of corporate communications for Cigna, a big health insurer. He charged that the industry deliberately confuses its customers by making it hard to obtain information about its practices and issuing incomprehensible documents.
He also charged that the companies “dump the sick,” through rescissions and by purging small businesses whose employees’ claims exceed what underwriters expected. They are often hit with huge rate increases intended to force them to drop coverage.
The Commerce Committee also released a staff report elaborating on how insurance companies operating in every region of the country have used statistically manipulated databases to reduce their payments for services provided by doctors outside their networks. Patients must then pay the often considerable difference.
Any legislation to reform the health care system, and extend coverage to millions of uninsured Americans, must stop these practices.
One way to do that is by creating insurance exchanges where individuals and small businesses could buy policies from insurers that would be required to accept all applicants without regard to pre-existing conditions and charge them premiums unrelated to their health status, and would be barred from dropping them no matter what illnesses they developed.
If health care reform requires virtually all Americans to carry health insurance — as it should — industry leaders acknowledge that there would be enough healthy people paying premiums to offset the higher costs of covering the sick and the need for rescissions and other such practices would disappear.
No matter what happens, strong regulatory oversight will be a must to ensure that insurers skilled in denying coverage don’t find new ways to evade just claims.
Competition from a new public plan could provide a benchmark for judging how well private plans are performing. And clear evaluations of both public and private plans would be a boon for consumers. Senator Jay Rockefeller has proposed creating a nonprofit organization to grade all plans offered on a national exchange based on such factors as adequacy of coverage, affordability, customer and health provider satisfaction, and transparency of procedures and decision-making.
The health insurance industry has pledged to assist in the reform effort. Congress will have to be tough and vigilant to ensure that it does.
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