There’s a famous two-word phrase repeated twice, serially, by Marlon Brando, as the gone-over-the-edge Col. Walter E. Kurtz, condemned by the US Army to be “terminated with extreme prejudice,” in Francis Ford Coppola’s 1979 movie, Apocalypse Now: “The horror, the horror.”
Tuesday, June 16, Bart Stupak, Chair of the House Commerce Subcommittee held a three-hour hearing, “Termination of Individual Health Insurance Policies.” (
http://www.c-spanarchives.org/library/includes/templates/library/flash_popup.php?pID=287048-1&clipStart=&clipStop=)
The hearing was a follow-up to a lengthy investigation of health insurers that had recently been summarized in a compendious House report. Among the investigation’s discoveries was that the total compensation for one of the insurance CEOs (Identity not revealed in the hearing) was $1.2 BILLION, that rescissions of health insurance policies had netted insurance companies savings of $300 MILLION, and that, within the insurance industry claims investigation departments, insurance investigators were performance rated according to the sums they saved the company by rescinding policies. One such example cited was an employee who was heralded by the company for having saved the corporation $10,000,000 by canceling policies when healthcare claims were posted.
Rescission of an existing insurance contract is referred to in the industry as “post claims underwriting.” To clarify, post claims underwriting occurs in the individual policy market, not in the employer-sponsored group healthcare milieu.
Those whose employers do not offer health insurance and folks who operate mom & pop, business-for-self enterprises compose the bulk of the individual insurance market. The first step toward acquiring a health insurance policy is the completion of a lengthy health history questionnaire. Usually, the first health-related question asked is along the lines, “Have you ever had a health insurance policy cancelled/rescinded?” A positive response here will not only immediately disqualify the applicant for coverage by that insurer, but will for the remainder of that individual’s life, prevent him or her from obtaining any level of coverage from any insurer for any sum.
How rescission works. The individual applicant has completed the application to the best of his or her ability and has tendered to the agent-representative the necessary premium. The agent then forwards the application to the company’s underwriting department where the contained information is (supposed to be) thoroughly reviewed and investigated prior to actual issuance of the contract of policy. All such contracts fall into the legal classifications as “guaranteed renewable” and “unilateral.” That is, once issued, under HIPAA (Health Insurance Portability and Accountability Act of 1996) guidelines, not only may an insurer not refuse to offer to renew the contract under the same conditions as was the original contract, the insured applicant is the only party who may ever cancel the contract. That is accomplished most often by simply not paying a premium by the due date. If approved by the insurer, the applicant-now subscriber pays all required premiums in a timely manner, in return for which the insurance company is legally bound to pay all submitted legitimate claims that may be covered under the policy.
What the House report revealed, however, was that all the insurance companies have established claim flags that trigger an investigation of the claimant’s medical history, the sole purpose of which is to not only deny the immediate claim, but of rescinding the entire policy; usually all the way back to the original date of issue. That means, the insured, in addition to now having zero health insurance coverage, must also reimburse the company for any and all claims the company may have paid under the policy. One of the companies had 1,200 such flags, another had 2,000; all of which followed insurance policy verification requests from medical providers prior to dispensing therapies for expensive ailments. Not restricted to, but among, the flags were diagnoses of leukemia, all cancers, cardio-vascular diseases, endocrine anomalies, brain and nervous system disorders, etc. The types of information sought and secured that would premise rescission had no need whatsoever of a connection to the claim.
Nor must the applicant-subscriber have ever been aware of the existence of the condition upon which the rescission decision was made. For example, one of the witnesses at the hearing was 59-year-old Robin Beaton of Texas. She had purchased a plan from Blue Cross Blue Shield. A dermatologist had misdiagnosed acne as precancerous, but had also never informed Beaton of the diagnosis, thus making it impossible for her to include it in BCBS’ application for insurance. Yet when Beaton was later correctly diagnosed as suffering a virulent form of breast cancer, BCBS used the omission as grounds to deny coverage. That, the insurance did on the Friday that preceded the Monday she was scheduled to undergo a double mastectomy!
Another example was the late Otto Raddatz, of Illinois; represented on the panel by his surviving sister Peggy. Suffering from an aggressive non-Hodgkins lymphoma, Otto’s best hope was the costly stem-cell transplant the team of oncologists prescribed. He had only a three-week window durng which the transplant would be effective. However, upon receiving the request for authorization from the health providers, the insurance company, Fortis, rescinded his insurance policy. On his application for insurance, Mr. Raddatz erroneously indicated he had at some distant time in the past suffered gall stones. Never had he actually suffered gall stone difficulty, regardless, as he had included it in his application, Fortis proceeded to issue the policy, and collect insurance premiums, on the supposition that in fact he had. But when Fortis anticipated paying the expensive claim for a stem-cell transplant, the company used a minor notation a long-ago doctor had made in Otto’s chart that he had kidney stones — a condition Otto was neither treated for or even informed of by the physician — to rescind his policy, and to thereby damn the fellow to hopelessness and death.
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Three insurance company CEOs followed the victims of insurance company abuses as witnesses: Don Hamm, of Assurant Health; Richard Collins, of Golden Rule; and Brian Sassi, of Wellpoint health Networks. Before the subcommittee members, all of whom expressed outrage over the industry’s loathsome post-claims underwriting practices, the CEO-witnesses attempted to defend what is to most wholly indefensible. All posited post-claims underwriting was an essential and legitimate tool for rooting out fraudulent health insurance applicants. All went so far as to defend using preexisting conditions the applicant may never have been aware of, or informed of, or of application questions that definitely seemed to be designed to be confusing to the applicant, and preexisting conditions that were (unknown to the insured and therefore not disclosed by the insured) completely irrelevant to the specific treatments being sought, as grounds for rescission.
Chairman Stupak read a question from Assurant’s application to CEO Hamm, then asked the executive to tell the committee what that “Have you ever had _____?” was referring to, “What is that, can you tell us?” The CEO of the company did not know the answer, and replied that he did not know.
The evidence here so strongly suggests that at least one of the purposes of the insurance application is to provide a basis for later rescission of the contract that it deserves reiteration. The insurance company president, under oath, asserted that he had no idea how he could have answered one of the questions on his own company’s application for insurance!
The CEOs also testified that rescission was relatively rare. That of course depends on how one defines “relatively rare.” The House report that studied thousands and thousands of cases where claimant’s claims had been denied and experienced their policies cancelled paints a different picture altogether.
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