Who Are The Real Bad Guys?

Stanley Feld M.D.,FACP.MACE

In my first blog I said all the stakeholders are responsible for the dysfunction of the healthcare system. Patients, physicians, hospitals, drug companies, the government and the healthcare insurance industry are all to blame. In my view the healthcare insurance industry has done the most to destroy America’s healthcare system. In its quest for short term profit they are killing the goose that laid its golden egg.

California usually recognizes trends in America early. A trend has surfaced in Los Angeles. In the last year a number of law suits have been filed in California by political leaders, regulators and consumers. Decisions made in Los Angeles highlight the healthcare insurance industry as the big bad guy in America’s healthcare crisis. Patients’ complaints have sparked state hearings of Blue Cross policies.

“Regulators want to see whether the healthcare firm is adhering to an accord with California. California has received more than 1,600 complaints from consumers, physicians and hospitals about Blue Cross of California since the state's largest health insurer was acquired by an Indiana firm in 2004, officials said Tuesday.”

One could guess the complaints are warranted. If complaints are surfacing in Los Angeles, one could also assume there is cause for complaint in the rest of the U.S. Hopefully the state boards of insurance in other states are heeding the complaints of citizens.

”The state announced plans this week to hold a public hearing in Los Angeles on July 19 on how well Blue Cross has lived up to promises it made nearly three years ago as part of the $21-billion acquisition.”

“It is the latest sign that state regulators are stepping up scrutiny of insurers, particularly Blue Cross, a unit of Indianapolis-based WellPoint, which has more than 8 million customers in California.”

The state regulators in each state have control over the issuing of permits to sell healthcare insurance in its state. State regulators are hopefully starting to flex their muscle in favor of patients. This should have been happening all along.

“The Department of Insurance, another California regulator, last week issued a report of an investigation that found BC Life & Health, another WellPoint unit, had revoked 1,880 individual health insurance policies in California in 2004 and 2005, and a review of 83 sample cases cited more than half for alleged violations of fair claims handling laws. The citations could lead to fines of as much as $10,000 per infraction.”

The way healthcare insurance companies increase their profits is to increase patients’ premiums, decrease patients’ healthcare insurance coverage, eliminate the sickest patients from their insurance roles, and reduce payment to providers. It seems that BC,BC of California a Wellpoint unit has done all of the above.

“This summer, Blue Cross is imposing fee reductions on physicians at the same time it is sending letters to policyholders notifying them that their premiums are going up because of increasing medical expenses, said Karen Nikos, a spokeswoman for the California Medical Assn., the state's largest physician trade group.”

"This is exactly what we said would happen," she said. "This is what happens when you only have a few insurance companies controlling all insurance. They do it because they can."

Wellpoint, the parent company of Blue Cross, received reimbursement from Blue Cross. Blue Cross listed the reimbursement as an administrative expense. Blue Cross of California financial statements then justified an increase in healthcare premiums because of increasing expenses.

”Regulators also are troubled by a $950-million payment Blue Cross made this spring to WellPoint. The department is investigating whether the payment violates the state's terms for the acquisition.”

The $950 million is the administrative fee of Wellpoint in California alone. It partly explains the $150 billion spent nationally for administrative fees to the healthcare industries.

California has many consumer rights organizations trying to protect the consumer.

“The Foundation for Consumer and Taxpayer Rights said it conducted an analysis of money Blue Cross has sent out of state to WellPoint and its affiliated companies since the acquisition, and the latest dividend was only the tip of the iceberg. The Santa Monica-based group, a frequent critic of the insurance industry, urged regulators to investigate as much as $6.5 billion in transfers from Blue Cross to WellPoint and its affiliates out of state.”

Blue Cross and Blue Shield is not the only company playing this game.

“The city attorney of Los Angeles says Health Net defrauded policyholders by dropping patients who needed costly care.”

“The company defrauded thousands of policyholders using "a wide range of unlawful, unfair and fraudulent acts and practices" aimed at avoiding payment for expensive treatment by canceling the policies of those who needed it, "rendering that coverage largely illusory," the suit maintained.”

“Los Angeles City Atty. Rocky Delgadillo said in an interview Wednesday that he was opening a separate criminal investigation into Health Net's practice of paying employee bonuses based in part on canceling policies of people who have submitted substantial medical claims.”

This lawsuit concentrates on individual healthcare insurance policies not group policies. The individual policy holders paid a premium for these policies with after tax dollars. For a company to create incentive bonuses for employees to find the sick patients and cancel their policies is unconscionable.

“Health Net has been in government investigators' cross hairs before. In November, the company's bonus program was made public in an arbitration hearing and sparked outrage. Within a week, Health Net was socked with a $1-million fine by state regulators for lying twice to investigators about such payments. The state is still investigating the company's bonus and cancellation practices.”

“One of a handful of insurers that dominate the California marketplace, Health Net is the first to be tagged by a city task force investigating tactics throughout the industry that make it difficult or impossible for consumers to get the coverage for medical care they believed they were buying with their premiums.”

This week an arbitration judge ordered Health Net to pay one patient 9 million dollars for its behavior.

“Arbitration judge Sam Cianchetti found that by canceling the insurance policy of Patsy Bates, a breast cancer patient who used Health Net for her health insurance, the company violated numerous California laws, the Los Angeles Times said”.

"It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive," the retired Los Angeles County Superior Court judge said.”

I am happy to see the California Medical Association speaking out for patients. I am also happy to see that multiple state agencies and authorities are stepping up to solve these abuses to patients and providers.

“Dr. Richard Frankenstein, president of the California Medical Assn., applauded the effort to put an end to what he said looked like a scheme "to rapidly take people's money and slowly tell them they won't pay their claims."

The state agencies are imposing fines. I do not believe fines are enough of a deterrent for these misdeeds. The following statement says it all.

"It is sort of like giving a bank robber a speeding ticket for driving too fast in the getaway car," said Jerry Flanagan, a patient advocate with the Foundation for Consumer and Taxpayer Rights. "The real question is, what will they do next and are they looking at the underlying crime as opposed to a misdemeanor?"

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Comments

[Vino Nebbiolo]

Good post, but have you thought about Who Are The Real Bad Guys before?

[Jack Thompson]

What a great site. It is nice to read from a expert in the field.

[jeffrey dach md]

A simple solution to end this health insurance abuse is have the states regulate the health insurance industry just like a public utility is regulated.

This will rein in the obscene profits made by the insurance industry taking advantage of the vulnerability of sick Americans.

How does one deal with an eight hundred pound Gorilla that misbehaves and denies coverage for your medical bills?

Patsy Bates found out when a California court awarded her 9 million dollars for damages.

Her insurance carrier, Health Net cancelled coverage when she needed breast cancer treatment.

Her lawyer, William Shernoff, not only read the book, he wrote the book: "Fight Back and Win: How to Get HMOs and Health Insurance to Pay Up".

Bravo for LA City Attorney Delgadillo and New York City Attorney General Andrew Cuomo for going after the health insurance industry for fraudulent practices such as cancellation for pre-existing conditions and underpayment for out-of-network doctor bills.

To read more:

http://jeffreydach.com/2008/02/24/fighting-the-abusive-practices-of-health-insurance-companies-by-jeffrey-dach-md.aspx

Making Your Health Insurance Company Pay Up by Jeffrey Dach MD

Jeffrey Dach MD
http://www.drdach.com

[Mike]

Here's a thought. If we implemented a universal single payer health care plan , then the health insurance industry would go out of business overnight and many would be unemployed - but - they would have health care and that is more than they have ever done for us.