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September 20, 2006

Make You Feel Safer?

One of the recurrent questions I get on panels, call-in shows, and e-mails is "what will be required to change the health care system? What can be done?" It's not a query I'm particularly well-equipped to field, but I think a good start would be photocopying this article on retroactive cancellations by insurers and handing a copy out to each and every American. No other piece I'm aware of as clearly exposes the absurdities and cruelty of the system, and so irresistibly signals the need for reform.

The actual facts in the report are basic: California state regulators are investigating Blue Cross for unlawful cancellations of policies. When you buy individual coverage, unlike when you buy into group coverage, insurers can reject you based on your health history or conditions. In order to protect against fraud -- say, someone being diagnosed with heart disease, then applying for insurance the next morning without mentioning it -- the law allows for insurers to cancel policies if the applicant engaged in "willful misrepresentation." What's so clever about that is how the insurance industry has redefined the standard: If you had a condition you didn't know about, they'll seek to not only yank your policy, but dispatch debt collectors to recover what they've already paid out.

In practice, the scam works like this: Selah Shaeffer, age four, was diagnosed with an aggressive, cancerous tumor in her jaw. The family had been with Blue Cross for about a year, and the bump was exmined and biopsied after they'd begun insurance. But because it was growing before, Blue Cross cut off reimbursement for surgeries it had already authorized, and is now trying to recover $20,000 from the Shaeffers. Or take the Nazertyans, who had premature twins. They were covered by Blue Shield all throughout, and disclosed all facets of the birth and operations. Blue Shield not only dropped, them, but was trying to get back $98,000 they'd already paid under the rationale that the Nazertyans hadn't disclosed an early miscarriage. After the LA Times reported the stroy, Blue Shield called off the debt collectors.

What's so remarkable about all this is what it exposes about how health insurance in this country works: We rely almost exclusively on private insurers whose primary business imperative is not to pay when we get sick. They do that by seeking to deny coverage before the fact, or reject claims afterwards. They pay for platoons of employees who have no job other than scrutinized thousands of policies a week to find sufficient cause for cancellation. Say what you will about the inefficiencies of the public sector, but can it really match the ruthlessness and absurdity of insurers spending large amounts of money so they don't have to insure? Is that sort of profit motive really what you want underlying your health care coverage?

September 20, 2006 | Permalink

Comments

When they retroactively cancel a policy, do they have to return your premiums?

Posted by: SP | Sep 20, 2006 1:13:27 PM

When they retroactively cancel a policy, do they have to return your premiums?

Who cares? The set cases where they retroactively cancel *and* don't claim that you owe them tens or hundres of thousands of dollars is a null set. Also, you'll then be stuck without health insurance and with an uninsurable pre-existing condition, putting you outside of any ability to get health insurance in the future.

Yeah, more competition will sure solve that problem.

Posted by: paperwight | Sep 20, 2006 1:30:51 PM

Stop the italics!

Posted by: Kylroy | Sep 20, 2006 1:47:37 PM

Dammit, I said stop!

Posted by: Kylroy | Sep 20, 2006 1:48:16 PM

My reason for asking is that if they don't, it may be easier to prove fraud. If they keep taking your money with no intention of providing anything of value for it, it's a pure con job- taking money from people and keeping it and not providing anything in return. Especially if they have some clear cutoff such as when reimbursements surpass premiums paid.

Posted by: SP | Sep 20, 2006 1:50:44 PM

It's basically fraud anyway. The money they took was to provide insurance in the case of unexpected medical expenses. It's not really material if they give the money back once they decide it's no longer in their interests to keep that promise, and try to soak you for the expenses they promised to cover.

Posted by: paperwight | Sep 20, 2006 1:54:00 PM

...I give up.

Anyway, they do have to give back premiums when they rescind coverage. But they only bother to scrutinize your plan for recission when you have huge claims that dwarf your premiums.

Working in individual health insurance, the big difference is that you can rescind people for failing to disclose symptoms (where in group insurance they only have to tell you about actual treatment received). The logic being that somebody might notice a lump, and waits for their individual application to go through before getting it looked at - wheareas the person picking up employer coverage can only join when they first qualify for the plan.

But claiming people should have perfect knowledge of their health at all times...that's a new one. More to the point, the people in these situations are sick, stressed, and frequently near-broke - folks unlikely to be able to manage an effective legal fight. I bet BCBS is hoping to implement a massive puppy-kicking initiative for good measure.

Posted by: Kylroy | Sep 20, 2006 1:57:23 PM

Back when I was an administrator at a private school looking around for group health ins. I was told by sales rep that health ins companies hate teachers because they "maximize their claims" which meant that they didn't just accept claim rejections but wrote letters and had back up documentation so that they actually got what their policies were obliged to supply. This was 20 years ago before we knew there was a crisis.

Posted by: cathy | Sep 20, 2006 3:13:54 PM

What's so remarkable about all this is what it exposes about how health insurance in this country works: We rely almost exclusively on private insurers whose primary business imperative is not to pay when we get sick.

That is the best single-sentence summary of what's wrong with American healthcare I've seen so far. Single-payer activists would do well to memorize it and quote it on demand.

Posted by: Tom Hilton | Sep 20, 2006 3:41:07 PM

This is just one of a thousand ways that the entire deck is stacked against you as an insured. If you are a homeowner, have you ever actually sat down and read the policy on your house? The exclusions allowed vary by state, but in almost all cases you would be hard pressed to tell what, if anything, your insurance would actually pay for in the event something happened to your home.

Basically, whether you are talking about health or property insurance, the insurance companies ruthlessly rig the system through lobbying to maximize their odds and minimize their exposure at the insureds' expense, and then they game whatever already favorable system they end up with.

Posted by: Jeff in Texas | Sep 20, 2006 4:30:31 PM

What's so remarkable about all this is what it exposes about how health insurance in this country works: We rely almost exclusively on private insurers whose primary business imperative is not to pay when we get sick.

I don't even recall the number of times I've written that very thing, at least once or twice in this comment section.

Posted by: paperwight | Sep 20, 2006 5:03:22 PM

I'm pretty convinced at this point that my insurer just randomly declines some of my claims in the hopes that I won't fight them. It isn't difficult to get them reversed so far - just call them up once or twice and say "see, here on page 17? eye exams are basic, and covered." and they do it - but the trend is pretty clear.

Posted by: Nathan Williams | Sep 20, 2006 5:04:15 PM

Nathan - harassing people so you can make (or save money) isn't exclusive to insurance companies. Hospitals will frequently keep re-sending a claim again and again, because it's hardly bad for them if it happens to get paid twice. This means that insurance companies have whole divisions of people whose sole job is to weed out duplicate claims. Not fraudulent claims, not incorrect claims, but a noticeable percentage of their workforce looking for duplicates and duplicates alone.

Posted by: Kylroy | Sep 20, 2006 5:31:35 PM

[i]What's so remarkable about all this is what it exposes about how health insurance in this country works: We rely almost exclusively on private insurers whose primary business imperative is not to pay when we get sick.[/i]


Uhh hate to break the news, but a socialized medical system works the same way. Somebody MUST deny care, or else costs will continue to spiral out of control. So you have a choice: either the insurance guy can deny claims, or the government can. But dont live in a dream world in which soc med somehow overcomes that truth. Canada denies care just as much as the US does, it just comes from a different authority.

Posted by: joe blow | Sep 20, 2006 7:36:44 PM

Has anyone got around to sending this along to Jane Galt so that she can explain again how such insurer antics can't possibly happen in a free market and that there must be regulations forcing the carriers to do this?

Posted by: DaveL | Sep 20, 2006 7:48:22 PM

Uhh hate to break the news, but a socialized medical system works the same way. Somebody MUST deny care, or else costs will continue to spiral out of control. So you have a choice: either the insurance guy can deny claims, or the government can. But dont live in a dream world in which soc med somehow overcomes that truth. Canada denies care just as much as the US does, it just comes from a different authority.

Uh, this is kind of false, because the incentives are *really* different. Or do you not subscribe to the notion that corporations are in it to maximize profit? Insurance companies MAKE MORE MONEY when they tell you to get fucked, especially if you're an individual, rather than a group with bargaining power.

Posted by: paperwight | Sep 20, 2006 7:57:22 PM

I wouldn't get too upset, pw.
I figure joe blow has brown eyes : because you can see how high things have filled up.

Canada doesn't have 16 layers of people fighting over the finances of somebody desperate to pay because survival is imminently at risk. That's what single pay stops.

Posted by: opit | Sep 21, 2006 1:24:59 AM

joe, a socialised medical system doesn't have a business imperative to deny coverage, because it's not a business. Might as well say that the US Army has a business imperative not to fire bullets, because it's expensive. The US Army's institutional imperative, for want of a better word, is to defend the nation. A socialised medical system's imperative is to preserve the nation's health.

Posted by: ajay | Sep 21, 2006 5:32:51 AM

Instead of making the leap from "Private insurers bad" to "Single payer", how about just implementing the Swiss system of subsidized and heavily regulated private insurance that can't drop you?

And I also wonder why Ezra almost never talks about one of the best performing health care systems in the world? Is it because the Swiss system is too private, and thus ideologically incorrect?

Posted by: Adam Herman | Sep 21, 2006 5:18:45 PM

Uh, this is kind of false, because the incentives are *really* different. Or do you not subscribe to the notion that corporations are in it to maximize profit? Insurance companies MAKE MORE MONEY when they tell you to get fucked, especially if you're an individual, rather than a group with bargaining power.

Yes, and governments feel the urge to control spending which leads to teh same rationing that insurance companies use when they deny claims. Why do you think Medicare has an SGR formula?

We can debate the level of rationing all day long. But you are sorely mistaken if you think socialized med nations dont ration care and deny care to patients.

In the USA, its routine to receive chemotherapy for stage IV breast cancer patients, even though it only extends life by a couple of months and costs well over $200,000 to administer. Canada doesnt put up wiht that crap. If you got stage IV in Canada, they pay for hospice care until you die. They dont dole out thousands of dollars in chemo drugs.

Posted by: joe blow | Sep 21, 2006 6:13:21 PM

joe, a socialised medical system doesn't have a business imperative to deny coverage, because it's not a business. Might as well say that the US Army has a business imperative not to fire bullets, because it's expensive. The US Army's institutional imperative, for want of a better word, is to defend the nation. A socialised medical system's imperative is to preserve the nation's health.


Surely you arent suggesting that socialized med nations ignore cost when delivering healthcare. Europe and Canadian laws REQUIRE that they operate their heatlhcare budget based on cost goals. They are cost-conscious just like the insurance company.

If you swithced USA to to socialized med overnight and fail to institute rationing procedures, our costs would skyrocket to 10 times what they are now. Read about the history of CAnadian/Euro healthcare. Costs didnt come down just by switching to a socialized model, the costs came down ONLY after cost rationing was introduced.

Posted by: joe blow | Sep 21, 2006 6:18:17 PM

They are cost-conscious just like the insurance company.

You do understand the enormous difference between cost-conscious and profit-driven, don't you?

Posted by: Tom Hilton | Sep 21, 2006 7:26:11 PM

You do understand the enormous difference between cost-conscious and profit-driven, don't you?


Of course. But some people on this thread refuse to recognize that socialized medicine uses rationing of care too. If they didnt, they wouldnt be able to stay afloat financially.

Take my stage IV cancer for example. Another good example is perinatal care. The USA throws about half a million bucks on every 26 weeker that is born. Europe/Canada dont do that. They watch the 25 weeker to see if it starts breathing on its own. If not, they tell the mom the baby is dead and thats that. They dont put the baby in NICU at a cost of $5,000 per day.

Posted by: joe blow | Sep 22, 2006 12:11:57 AM

"You do understand the enormous difference between cost-conscious and profit-driven, don't you?"

You don't think governments would turn a profit if they were competent enough to do so?

To be clear, what I mean is using health care taxes to pay for other things, like the US government currently uses Social Security and Medicare taxes to pay for other things.

If politician A can cut chemo money in order to get a bridge built in his district, he'll do it.

Posted by: Adam Herman | Sep 22, 2006 5:58:59 AM

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