Bonuses For Cancelling Insurance

This is the benign face of the industry that will undeniably get richer in a for-market "universal" health care approach:

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.

Cancellation GOALS. That's right. One man's catastrophic medical and financial situation is another man's new boat.

This is of course nothing new. It's standard practice for most insurers. When you get sick and put in a claim to actually use your health insurance, your file is immediately sent to the cancellation department and people review it for the slightest rationale to dump your coverage.

Now, market reforms like guaranteed issue, which would mandate that insurance companies cover anyone who wants health insurance regardless of pre-existing condition, would stop this practice. California's latest iteration of a health reform bill includes this policy. But let's not be so naive that insurers will not find other ways to stop paying their claims, and use the spectre of "affordability" to do so:

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 [...]

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.

Let's not claim that "but in the future, this will be illegal" and clap our hands in self-congratulation. This is ALREADY illegal in the state of California. You can't tie bonuses to claims reviews. But they did it nontheless.

So when you make deals with a for-profit health insurance industry, don't be surprised if they ever so slightly go back on them.