Pervasiveness of California rescissions
California fines plan for failing to reveal policy cancellation incentive
By Emily Berry
American Medical News
December 10, 2007
Health Net has agreed to pay the state of California $1 million for failing to tell the whole truth to regulators about how it rewarded its employees who canceled individuals’ health insurance. The company — and others — could face more fines in the future as the California Dept. of Managed Health Care continues to investigate insurance rescission practices.
The Dept. of Managed Health Care on two occasions asked Health Net officials whether they offered incentives to employees to cancel policies and was told incorrectly that there were no such programs, department spokeswoman Lynne Randolph said. California law does not allow insurance companies to compensate claims reviewers for decisions they make on claims.
“We are sorry for any misunderstanding with the DMHC,” Health Net CEO Jay M. Gellert said in a prepared statement.
The California Dept. of Managed Health Care is investigating various health plans over their rescission of individuals’ health coverage.
…the department fined Blue Cross of California, a WellPoint plan, $1 million in March and $200,000 in September 2006 for illegally canceling individual insurance policies. The department said Blue Cross failed to prove the applicants were intentionally deceptive — the only legal means by which a health plan may rescind coverage.
Blue Cross earlier this year settled lawsuits involving 6,000 patients whose policies had been rescinded. While the company denied any wrongdoing, in the settlement it promised to rescind coverage only if applicants “intentionally misrepresented” information.
Kaiser Foundation Health Plan has paid a total of $325,000 in fines over rescissions, though it has denied wrongdoing.
Meanwhile, the Dept. of Managed Health Care said that sometime next year it expects to wrap up its inquiries into more rescission allegations at Kaiser and at Blue Shield of California, PacifiCare and Health Net.
…other companies, including PacifiCare’s parent UnitedHealth Group, are still awaiting the state’s findings as to their own policy cancellations.
“Accurate medical underwriting helps consumers by holding down health care inflation across the individual health insurance market,” United spokesman Tyler Mason wrote in an e-mailed statement.
http://www.ama-assn.org/amednews/2007/12/10/bisc1210.htm
Comment:
By Don McCanne, MD
Although California has been in the news because of the rescission practices of its private insurers, this article demonstrates the pervasiveness of this practice.
UnitedHealth spokesman Tyler Mason’s statement that they are helping consumers by holding down health insurance inflation applies only to healthy consumers who clear their underwriting standards.
What about the consumers who really count, those who need health care? The private insurers not only leave them exposed to actual health care inflation, but they also add the impact of adverse selection, having siphoned off the healthy who are needed to dilute the costs of the sick.
Medical underwriting is not only perverse in its impact, it is also an expensive, wasteful administrative service found only in the private sector. It is a concept that does not even exist in a public insurance program since the mission of a public program is to prevent financial barriers to health care - for everyone, not just the healthy.