“The horror, the horror” — Health Insurance CEOs Testify before Congress
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the first health-related question asked is along the lines, “Have you ever had a health insurance policy cancelled/rescinded?”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.
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