Reuters’ Murray Waas has a fascinating look into how WellPoint — the nation’s largest insurer — has stretched the nation’s relatively lose anti-rescission laws to cancel health insurance coverage for individuals when they need it most. After they become ill.
The insurer is using a computer algorithm that automatically targeted “policyholders recently diagnosed with breast cancer” and investigated them for “fraud”:
Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information. WellPoint declined to comment on the women’s specific cases without a signed waiver from them, citing privacy laws.
That tens of thousands of Americans lost their health insurance shortly after being diagnosed with life-threatening, expensive medical conditions has been well documented by law enforcement agencies, state regulators and a congressional committee. Insurance companies have used the practice, known as “rescission,” for years. And a congressional committee last year said WellPoint was one of the worst offenders.But WellPoint also has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies, federal investigators told Reuters. The revelation is especially striking for a company whose CEO and president, Angela Braly, has earned plaudits for how her company improved the medical care and treatment of other policyholders with breast cancer.
The disclosures come to light after a recent investigation by Reuters showed that another health insurance company, Assurant Health, similarly targeted HIV-positive policyholders for rescission. That company was ordered by courts to pay millions of dollars in settlements.
While the practice of rescinding coverage is fairly common — since “it is important for these companies’ profit margins that they get rid of policyholders with expensive diseases” — the deliberate nature of these rescission are truly shocking.
Theoretically, existing federal law, as well as well as the new health care reform, protects consumers from rescission and policy cancellations. Insurers have been required to renew policies in the individual health insurance market under the Health Insurance Portability and Accountability Act (HIPAA) since 1996, but they often “do not follow federal standards and instead follow state laws that offer weaker consumer protections.” The federal law allows insurers to cancel policies due to non-payment of premiums; “fraud or other intentional misrepresentation”; if the insurer is leaving the market; if an individual or employer moves out of geographic area of the plan; or, in the case of an association policy, if an individual has left the association contracting with the plan” — and states are responsible for enforcing these rules and have jurisdiction to create even stronger regulations.
But insurers take advantage of weak state regulations — in fact, insurers have used their political power to prevent states from adopting stronger regulations — and the lose definition of ‘fraud’ to purge their rolls of costly patients. “The legally accepted definition that it is intentional misrepresentation, but state laws all very” and intentional is hard to determine, health policy wonk Peter Harbage told me during a phone interview. Did an individual intentionally exclude a prior condition or was the condition undiagnosed or simply forgotten? “Insurers have tried to stretch the definition as far as they can and that’s what we’re seeing with WellPoint,” he said.
Democrats have promised that the new health care law will end such abuses, but Harbage is skeptical. The new reform law restates existing HIPAA regulations without giving the federal government greater oversight abilities. “People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end,” he’s quoted in the article as saying. “Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key.”
To that end, Harbage says that there are at least three things lawmakers can do to strengthen the existing legislation: consumer education, prior review and data tracking. “Third party review of recissions is realistic. Having the state review every rescission before it’s made is something that could happen. At a minimum, you could have states track who’s being rescinded. They don’t even know when a rescission occurs. Regulators could be much more proactive in educating people about their rights. People generally have no idea where they can go or who they can turn to,” Harbage said.
Incidentally, WellPoint has a long history of exploiting the so-called ‘fraud” loophole to rescind or cancel coverage. As Waas notes, a 2007 investigation by the California Department of Managed Health Care selected 90 instances in which Anthem Blue Cross of California “dropped the insurance of policyholders after diagnoses with costly or life-threatening illnesses to determine how many were legally justified” and found that none were. Similarly, an “investigation last year by the House Energy and Commerce Committee determined that WellPoint and two of the nation’s other largest insurance companies — UnitedHealth Group Inc and Assurant Health, part of Assurant Inc — made at least $300 million by improperly rescinding more than 19,000 policyholders over one five-year period.” Read that full report here.