Healthcare Reform: HMO Practices of Dropping Coverage
Anthem Blue Cross to Pay Millions for Dropping Coverage
Anthem Blue Cross, the largest for-profit health insurer in California, will pay a $1-million fine and offer new coverage to thousands of people in the state whose coverage was dropped after they submitted costly bills for medical care.
The insurance giant also will reimburse people for their out-of-pocket medical expense the patients paid after their coverage was dropped, according to a deal reached between Anthem and the California Department of Insurance. It is estimated that Anthem, a subsidiary of Indianapolis-based WellPoint Inc., could end up paying up to $14 million in reimbursements.
The settlement deal between Anthem and state insurance regulators ends state prosecution of the company over allegations that Anthem broke state laws between 2004 and 2008 by dropping 2,330 members in Anthem's preferred provider organization (PPO) policies who filed claims.
Earlier Settlement Reached
In 2008, Anthem agreed to pay $10 million in fines to settle similar allegations that the company dropped more than 1,700 California members of HMO-type coverage plans. That case was brought by the state's Department of Managed Health Care, another regulator of insurance companies.
As part of that earlier settlement, Anthem also agreed to change how it sells and manages insurance coverage in California, including making coverage applications simpler and reducing the number of people whose health insurance coverage is rescinded, according to a report in the Los Angeles Times.
California Cracks Down on Insurance Companies
California health insurance regulators have been working for two years to crack down on unscrupulous insurance companies who drop members for improper reasons. Other insurers, including Health Net, have faced fines and jury verdicts for dumping sick policyholders who file claims for coverage.
In one case, Health Net was ordered to pay $9 million to a Gardena hair salon owner whose coverage was rescinded while undergoing chemotherapy treatments for breast cancer.
Although Anthem has never said how much money it saved by rescinding more than 2,000 policies, during the prosecution of Health Net over similar allegations, Health Net admitted saving $35.5 million by canceling 1,600 policies.
Not Enough for Some Critics
While Anthem policy holders who lost their coverage will be offered new policies with no questions asked and may be reimbursed for their out-of-pocket medical expenses, the settlement will not compensate victims who suffered worsening of their conditions as a result of losing their coverage. Also, some Anthem customers suffered damage to their credit for losing their coverage through no fault of their own, which is not covered by the settlement.
Shady Insurers Must Be Punished
California insurance regulators should be praised for taking down Anthem Blue Cross and other large insurers who break the law by rescinding the policies of customers for filing expensive claims for coverage. Millions of people pay monthly health insurance premiums in anticipation of a rainy day, when they will need coverage for unexpected injuries or illnesses. When an insurance company violates that relationship by yanking coverage out from under policyholders at the time they need coverage most, they must be made to pay.
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U.S. senator questions CIGNA over practices
Wed Aug 5, 2009 2:10pm EDT
WASHINGTON (Reuters) - A top Democratic senator is seeking information on Cigna Corp's (CI.N) treatment of small businesses as part of an ongoing investigation into the health insurance industry, the lawmaker said on Wednesday.Senate Commerce, Science and Transportation Committee Chairman John Rockefeller, in a letter to the company, asked for information about its handling of the small business group health insurance market and whether it dropped those whose employees made numerous and costly benefit claims.
Although the insurer "recently denied that Cigna 'purges' small business group health accounts, the committee has reviewed information suggesting otherwise," Rockefeller wrote to Cigna.
The senator asked Cigna to explain its February 5 comments to investors about its approach to small businesses, in which company executives used terms such as "purge" to describe their strategy. Rockefeller requested answers by August 19.
He also asked the company how much money it had saved in medical claims as a result.
Representatives for Cigna could not be immediately reached for comment.
A copy of the letter was posted on Senate committee's website here
(Reporting by Susan Heavey; Editing by Lisa Von Ahn)
© Thomson Reuters 2009 All rights reserved
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Former CIGNA Executive Testifies That Health Plan Profits Often Trump Patient Health
Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans.By Steve Davis, Managing Editor, (sdavis@aispub.com), July 9, 2009
In what could be a blow to the health insurance industry's influence on the health reform debate, a former health plan executive told a Senate committee that publicly traded health insurers sacrifice the health of their members in exchange for higher earnings.
At a June 24 hearing before the Senate Committee on Commerce, Science and Transportation, Wendell Potter, who retired last year from his post as CIGNA Corp.'s vice president for corporate communications, testified that large health insurers routinely and intentionally drop high-risk members. They also make coverage exclusions difficult for policy holders to understand and dramatically boost premium rates for small employers that have high claim costs, he asserted.Potter, who spent 15 years at CIGNA, said health plans have a financial incentive to cancel the policies of their most costly members and have implemented strategies to do so. "They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy," he testified. And canceling policies for even a small number of such members can have "a big effect" on the bottom line, he added. "Where is the logic and the humanity of having pre-existing conditions not covered in our society?" Potter asked. He noted that his testimony wasn't aimed at CIGNA specifically, but rather at an industry that he said is "taking this country in the wrong direction."
In a prepared statement, CIGNA countered Potter's testimony and said the company has long supported a health care system that mandates insurance coverage for everyone at the same rates "regardless of whether or not the person has a pre-existing illness."
Rockefeller Supports Public Option
Although Potter's allegations are nothing new, such testimony from a health insurance "insider" could give some lawmakers ammunition in their fight to create a public health insurance option that will "keep health insurers honest," as some advocates of such an option contend. Committee Chairman Sen. John D. Rockefeller IV (D-W.Va.) is a strong supporter of a public insurance option."Some members of the Senate say a public [insurance] option that would put Medicare dollars in competition with very wealthy insurance companies...is somehow unfair, un-American and against the free enterprise system," Rockefeller said. "It is the free enterprise system. But sometimes you have to trigger that system" to work.
Committee Calls for 'Standardized Language'
Rockefeller said forms that detail coverage limitations, and explanation of benefits (EOB) statements, are difficult for most people to understand. Potter suggested that the medical and legal jargon used on the forms and statements is intentionally confusing.
Insurers "certainly could devote some resources to make EOBs clearer, but it is not a priority. And I think they realize most people are baffled by EOBs, don't know what to do with them and throw them away."
Rockefeller told the committee that standardizing the language for EOBs and materials that explain coverage "would be a sensible idea." Karen Pollitz, project director of the Health Policy Institute at Georgetown University, agreed and suggested that the Federal Employees Health Benefits Program (FEHBP) could serve as a model. "Over the last few months, we have been reading through policies offered through FEHBP. There are rules about how things have to be explained in a way that participants can understand and examples to illustrate what is covered and what is not covered," she explained. "The terms are standardized, and there is an order."
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UnitedHealth Group ex-CEO forfeits $620 million
January 1st, 2008 William McGuire, M.D. former chief executive of UnitedHealth Group, agreed to one of the largest executive-pay givebacks in history, forfeiting $620 million in stock option gains and retirement pay, to settle civil and federal claims against stock-option backdating. The final outcome, however, remains uncertain as of Dec 28.
A year ago, McGuire was ousted from his position as one of the most successful and highest paid executives in the U.S. because of the back-dating scandal. More than 80 corporate officials lost their jobs in the scandal.
He still retains about 24 million stock options that currently could be cashed in for a gain of about $800 million, on top of the $500 million in pay he received from UnitedHealth between 1991 and 2006. A freeze on these assets was continued by U.S. District Judge James Rosenbaum in a Dec 26 ruling, pending a decision by the Minnesota Supreme Court on whether he has the power to examine the settlement beyond just rubber-stamping it. State courts give varying degrees of deference to special litigation committees.
Calling the settlement a "business judgment," Judge Rosenbaum noted that the special litigation committee's "lack of any findings…leaves no tracks showing why or how its business judgment can be considered reasonable."
The committee, appointed by UnitedHealth's board, had concluded that some of the accusations against McGuire might have merit, but the cost and risk of suing him might not be worth it. McGuire neither admitted nor denied wrongdoing.
The two former Minnesota Supreme Court justices on the committee wrote that their ability to evaluate McGuire's potential defenses were "hampered by his unavailability for an interview." They interviewed 50 other people over the course of a year (Joshua Reed, Chicago Sun-Times 12/7/07).
Judge Rosenbaum also expressed some thoughts about the amount of money that McGuire had claimed when he was forced out of UnitedHealth. "Words such as 'huge,' 'fantastic,' 'astounding,' 'staggering,' or 'astronomical,' do not describe $1 billion," he wrote. "Such a sum can only be thought of as 'transcendent,' or in terms of the gross national product of smaller members of the United Nations" (Vanessa Fuhrmans and Peter Lattman, Wall St J 12/28/07).
McGuire is barred from serving as an officer or director of a public company for 10 years. He also still faces a criminal inquiry.
UnitedHealth's current CEO, Stephen Hemsley, plans to voluntarily have his remaining options repriced, effectively forfeiting $50 million, on top of the $190 million in gains he agreed to give back last year on options with questionable grant dates (Wall St J 12/7/07).
McGuire turned UnitedHealth into one of America's largest health-care companies through a series of mergers.
While growing into a colossus, the company has repeatedly failed to perform its basic job of paying medical bills. UnitedHealth, which covers 70 million Americans, has been sanctioned in nine states for paying claims slowly; shortchanging doctors, hospitals, or patients; or poorly handling complaints and appeals.
One Nebraska woman complained to state regulators that UnitedHealth's computers had incorrectly rejected claims related to her son's surgery—six times.
At one point, UnitedHealth owed Dr. George Schroedinger, an orthopedic surgeon, $600,000. He and his clinic sued UnitedHealth of the Midwest in 2004.
Ruling in favor of the clinic, U.S. District Judge Stephen Limbaugh of Missouri declared that the company's claims processing systems were "flawed in many ways, denying, reducing, and improperly processing claims on a regular basis. And despite innumerable requests, United was unwilling to remedy the underlying errors in its systems" (Star-Tribune 12/12/07).
Payment troubles continued after the verdict, and Dr. Schroedinger filed a second lawsuit. "These people can never get it right, which says to me that they just plain lie," he said in an interview.
Failure to pay isn't the only complaint. The insurer also gives incorrect information on which physicians are in its network, creating enormous problems for physicians' staff.
The AMA said that no other insurer has prompted as many complaints as UnitedHealth about abusive and unfair payment practices. AMA officials have met with UnitedHealth executives 16 times since 2000, with little to show for it.
"They have always got a new plan to fix it," said Dr. William G. Plested III, past president of the AMA. But "nothing ever happens."
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HMO Plans to Drop Coverage of North Carolina State Employees, Retirees.
Byline: Vicki Lee Parker
May 31--Unable to resolve its months-long dispute with state health plan officials, WellPath Select plans to drop HMO coverage for 35,782 state employees, retirees and their family members next month.
The financially strapped health-maintenance organization mailed letters this week to affected members in 22 counties, including Wake, Orange and Durham, explaining that their coverage will end June 30.
State officials, however, will continue their fight to block WellPath. Officials want to prevent WellPath from dropping coverage until Sept. 30, when its contract is scheduled to expire. The state has already been successful in delaying WellPath, which wanted to drop coverage in 13 counties in April.
"We think the letter is premature," said Jack Walker, executive administrator of the state employee health plan, which has about 550,000 members. "We are pursuing all legal actions to stop the departure."
WellPath's decision follows a recent ruling by the Office of Administrative Hearings, which oversees disputes involving state agencies, that gave the company permission to drop the state coverage if it gave 30 days' notice and forfeited a $500,000 deposit.
"The issue from our standpoint is closed," said Tracy Baker, president of Chapel Hill-based WellPath, which was sold by Duke University last year to Coventry Health Care, a Maryland HMO chain. "Now we need to work to help move those memberships onto the state plan," Baker added.
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Health Net to make amends after patients were dropped
ASSOCIATED PRESS
September 13, 2008
LOS ANGELES – One of the state's largest health care insurers has reached a $25 million agreement with regulators in an effort to right the wrong of dropping coverage for nearly a thousand patients when they tried to make use of their policies.
Woodland Hills-based Health Net has agreed to offer new coverage to 926 customers who were dropped from individual or family policies in the years since 2004.
In a settlement with the California Department of Insurance, the company pledged to repay up to $14.2 million in outstanding medical expenses and waive up to $7.2 million in insurance premiums. The company will also pay a $3.6 million fine.
Insurance Commissioner Steve Poizner announced the settlement yesterday.
The company did not acknowledge any wrongdoing and did "not necessarily agree" with the allegations, but the settlement is an opportunity "to move forward and make sure these affected individuals can obtain coverage," Health Net Chief Executive Jay Gellert said.
Poizner praised the health insurance company, saying its broad changes "to underwriting and rescission practices will serve as a model and example to other health insurers."
Jason Kimbrough, spokesman for the state Department of Insurance, said the agreement binds Health Net to do a better job of gathering medical information before issuing policies. The insurer has also pledged to notify consumers when the information on their applications is being investigated and provide third-party review for future rescission decisions.
Consumers who suspect they may have been affected by the settlement can contact Health Net at (866) 458-2130.
Rescission is the industry's term for dropping patients from coverage when they try to make claims on their health insurance policies. In the past two years, the state's largest health insurers have been accused of improperly engaging in the practice. In state settlements, they have agreed to pay millions of dollars in penalties and to restore coverage to thousands of policyholders who were dropped after they became ill.
In lawsuit filings and previous action from regulators, Health Net has been rebuked for allegedly awarding bonuses to analysts in charge of cancellations. Health Net contended that policies were pulled because policyholders failed to properly disclose pre-existing conditions.
Critics contend that insurers use minor and often unintended errors on applications as excuses to pull policies when costly bills come in.
Last November, the company was fined $1 million for misleading state investigators looking into its rescission procedures.
In February, Health Net was ordered to pay $9.4 million for dropping the coverage of a hairdresser from Lakewood whose policy was canceled while she was undergoing chemotherapy for breast cancer.
Health Net also is fighting a lawsuit filed by the Los Angeles city attorney that accuses it of fraudulent practices.
The city attorney also has sued Blue Shield of California for $1 billion, contending the company dropped hundreds of policyholders illegally and used deceptive advertising.
The state Department of Managed Health Care earlier reached deals with Anthem Blue Cross and Blue Shield. The insurers agreed to pay $13 million in fines and offer new health coverage to thousands of people who lost their coverage.
The department also reached similar agreements with PacifiCare and Kaiser.
Health insurer tied bonuses to dropping sick policyholdersBy Lisa Girion
Los Angeles Times Staff Writer
November 9, 2007
One of the state's largest health insurers set goals and paid bonuses based in part on how many individual policyholders were dropped and how much money was saved.
Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.
The revelation that the health plan had cancellation goals and bonuses comes amid a storm of controversy over the industry-wide but long-hidden practice of rescinding coverage after expensive medical treatments have been authorized.
These cancellations have been the recent focus of intense scrutiny by lawmakers, state regulators and consumer advocates. Although these "rescissions" are only a small portion of the companies' overall business, they typically leave sick patients with crushing medical bills and no way to obtain needed treatment.
Most of the state's major insurers have cancellation departments or individuals assigned to review coverage applications. They typically pull a policyholder's records after major medical claims are made to ensure that the client qualified for coverage at the outset.
The companies' internal procedures for reviewing and canceling coverage have not been publicly disclosed. Health Net's disclosures Thursday provided an unprecedented peek at a company's internal operations and marked the first time an insurer had revealed how it linked cancellations to employee performance goals and to its bottom line.
The bonuses were disclosed at an arbitration hearing in a lawsuit brought by Patsy Bates, a Gardena hairdresser whose coverage was rescinded by Health Net in the middle of chemotherapy treatments for breast cancer. She is seeking $6 million in compensation, plus damages.
Insurers maintain that cancellations are necessary to root out fraud and keep premiums affordable. Individual coverage is issued to only the healthiest applicants, who must disclose preexisting conditions.
Other suits have been settled out of court or through arbitration, out of public view. Until now, none had gone to a public trial.
Health Net had sought to keep the documents secret even after it was forced to produce them for the hearing, arguing that they contained proprietary information and could embarrass the company. But the arbitrator in the case, former Los Angeles County Superior Court Judge Sam Cianchetti, granted a motion by lawyers for The Times, opening the hearing to reporters and making public all documents produced for it.
At a hearing on the motion, the judge said, "This clearly involves very significant public interest, and my view is the arbitration proceedings should not be confidential."
The documents show that in 2002, the company's goal for Barbara Fowler, Health Net's senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year -- a monthly average of 22.9.
More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a "banner year" for Fowler because the company avoided about "$6 million in unnecessary health care expenses" through her rescission of 301 policies -- one more than her performance goal.
In 2005, her goal was to save Health Net at least $6.5 million. Through nearly 300 rescissions, Fowler ended up saving an estimated $7 million, prompting her supervisor to write: "Barbara's successful execution of her job responsibilities have been vital to the profitability" of individual and family policies.
State law forbids insurance companies from tying any compensation for claims reviewers to their claims decisions.
But Health Net's lawyer, William Helvestine, told the arbitrator in his opening argument Thursday that the law did not apply to the insurer in the case because Fowler was an underwriter -- not a claims reviewer.
Helvestine acknowledged that the company tied some of Fowler's compensation to policy cancellations, including Bates'. But he maintained that the bonuses were based on the overall performance of Fowler and the company. He also said that meeting the cancellation target was only a small factor.
The documents showed that Fowler's annual bonuses ranged from $1,654 to $6,310. But Helvestine said that no more than $276 in any year was connected to cancellations.
He said Fowler's supervisor, Mark Ludwig, set goals that were reasonable based on the prior year's experience.
"I think it is insulting to those individuals to make this the focal point of this case," Helvestine said.
Bates' lawyer, William Shernoff, said Health Net's behavior was "reprehensible."
He said the cancellation goals and financial rewards showed that the company canceled policies in bad faith and just to save money. After all, he told the arbitrator, canceling policies was Fowler's primary job.
"For management to set goals in advance to achieve a certain number of rescissions and target savings in the millions of dollars at the expense of seriously ill patients is cruel and reprehensible by any standards of law or decency," Shernoff said.
The company declined requests to make Fowler available to discuss the reviews.
Cianchetti, the arbitrator, earlier ruled the rescission invalid because Health Net had mishandled the way it sent Bates the policy when it issued coverage. At the end of the hearing, it will be up to Cianchetti to determine whether Health Net acted in bad faith and owes Bates any damages.
The disclosures surprised regulators. A spokesman said state Insurance Commissioner Steve Poizner was troubled by the allegations.
"Commissioner Poizner has made it clear he will not tolerate illegal rescissions," spokesman Byron Tucker said. "We are going to take a hard and close look at this case."
In recent months, the state's health and insurance regulators have teamed to develop rules aimed at curbing rescissions and to more closely monitor the industry's cancellation policies.
Other insurers that have rescission operations, including Blue Cross of California and Blue Shield of California, said they had no similar policies linking employee performance reviews to rescission levels. Blue Cross said it conducted audits to ensure that claims reviewers were not given any "carrots" for canceling coverage.
Bates, who filed the suit against Health Net, owns a hair salon in a Gardena mini-mall between a liquor store and a doughnut shop. She said she was left with nearly $200,000 in medical bills and stranded in the midst of chemotherapy when Health Net canceled her coverage in January 2004.
Bates, 51, said the first notice she had that something was awry with her coverage came while she was in the hospital preparing for lump-removal surgery.
She said an administrator came to her room and told her the surgery, scheduled for early the next day, had been canceled because the hospital learned she had insurance problems. Health Net allowed the surgery to go forward only after Bates' daughter authorized the insurance company to charge three months of premiums in advance to her debit card, Bates alleged. Her coverage was canceled after she began post-surgical chemotherapy threatments.
"I've got cancer, and I could die," she said in a recent interview. Health Net "walked away from the agreement. They don't care."
Health Net contended that Bates failed to disclose a heart problem and shaved about 35 pounds off her weight on her application. Had it known her true weight or that she had been screened for a heart condition related to her use of the diet drug combination known as fen-phen, it would not have covered her in the first place, the company said.
"The case was rescinded based on inaccurate information on the individual's application," Health Net spokesman Brad Kieffer said.
Bates said she already had insurance when a broker came by her shop in the summer of 2003, and said she now regretted letting him in the door. She agreed to apply to Health Net when the broker told her he could save her money, Bates said.
She added that she never intended to mislead the company. Bates said the broker filled out the application, asking questions about her medical history as she styled a client's hair in her busy shop and he talked to another client waiting for an appointment at the counter. She maintained that she answered his questions as best she could and did not know whether he asked every question on the application.
Bates' chemotherapy was delayed for four months until it was funded through a program for charity cases. Three years later, she can't afford the tests she needs to determine whether the cancer is gone.
So she is left to worry. She is also left with a catheter embedded in her chest where the chemotherapy drugs were injected into her bloodstream. Bates said she found a physician willing to remove it without charge, but he won't do it without a clear prognosis. That remains uncertain.
Shernoff, Bates' lawyer, claimed that the performance goals for Fowler showed that Health Net was bent on finding any excuse to cancel the coverage of people like Bates to save money.
"I haven't seen this kind of thing for years," Shernoff said. "It doesn't get much worse."
Monday, August 17, 2009
Healthcare Reform: HMO Practices of Dropping Coverage
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