Insurer-Assisted Suicide

The Washington Post today becomes yet another media outlet to detail the practice of rescission, whereby insurance companies go through your application form with a fine-toothed comb and look for any excuse to drop you from your coverage - but only after you try to use it to get treatment. They're perfectly fine with what they call "medical fraud" as long as you're just paying them your premiums. It's when you want to receive health care that fraud becomes the greatest threat facing the Republic.

The problem is that rescission just isn't a snappy enough description of the actual circumstance. I prefer "insurer-assisted suicide":

The untimely disappearance of Sally Marrari's medical coverage goes a long way toward explaining why insurance companies are cast as the villain in the health-care reform drama.

"They said I never mentioned I had a back problem," said Marrari, 52, whose coverage with Blue Cross was abruptly canceled in 2006 after a thyroid disorder, fluid in the heart and lupus were diagnosed. That left the Los Angeles woman with $25,000 in medical bills and the stigma of the company's claim that she had committed fraud by not listing on a health questionnaire "preexisting conditions" Marrari said she did not know she had.

By the time she filed a lawsuit in 2008, she also got a diagnosis of pancreatic cancer and her debts had swelled beyond $200,000. She was able to see a specialist by trading office visits for work on the doctor's 1969 Porsche at the garage she owns with her husband.

"I've had about 10 visits," Marrari said of the barter arrangement that has proved more reliable than her insurance. "The car needs a lot of work."

And where would Mrs. Marrari be if she didn't have a garage that could work on Porsches?

Nobody knows how much money has been saved through insurer-assisted suicide; three insurance companies admitted in a hearing this summer that they've cancelled 20,000 over five years at a savings of $300 million dollars. Given that amount of money, the fact that California's five largest insurers have paid around $19 million to deal with rescissions seems like a drop in the ocean. Here's something that's not in the article: when Anthem Blue Cross challenged the fine placed on them for rescinding policies, state regulators never even tried to file suit because they figured they would be outgunned in court.

"This is probably the most egregious of examples of health insurers using their power and their resources to deny benefits to people who are most in need of care," said Gerald Kominski, associate director of the Center for Health Policy Research at the University of California at Los Angeles. "It's really a horrendous activity on the part of the insurers." [...]

In the only case to go to trial in California, an arbitration judge awarded $9 million to a beautician who had to stop chemotherapy for her breast cancer after Health Net dropped her policy. Company officials declined to comment.

In a pending case, Blue Shield searched in vain for an inconsistency in the health records of the wife of a dairy farmer after she filed a claim for emergency gallbladder surgery, according to attorneys for the family. Turning to her husband's questionnaire, the company discovered he had not mentioned his high cholesterol and dropped them both. Blue Shield officials said they would not comment on a pending case.

You might be wondering whether there's a mechanism to stop rescission in the current plans on the table. The President and Democratic leaders would certainly tell you that's the case, if only by banning the refusal of coverage for pre-existing conditions. However, as seen from the paragraph above, the fines they may incur as a result will either be seen as the cost of doing business or a fine that will never be enforced. In addition, there are plenty of additional ways to evade responsibility.

If federal health-care reform bars companies from screening for preexisting conditions, insurers note that cancellations will no longer be an issue. But Melinda Beeuwkes Buntin, an economist at the Rand Corp., said that unless for-profit companies are compensated for taking higher-risk patients, the firms will continue to look for ways to unload them.

"They wouldn't be able to overtly kick you out, but that doesn't mean that they might not put, for example, more onerous preauthorization requirements on services that people who are at risk might need, and that might discourage you from re-enrolling next year," Buntin said.

As long as insurers' incentive to make a profit diverges from caring for their customers, insurer-assisted suicide will always be a reality. And as we've seen, balkanizing the enforcement to the state level instead of having a federal regulator cracking down on this will put the enforcement at the mercy of fragile state budgets and haphazard state regulators. Here is the entire enforcement mechanism, as far as I see it, in the Baucus draft plan from the Senate Finance Committee:

Ombudsman. In 2010, states would be required to establish an ombudsman office to act as a consumer advocate for those with private coverage in the individual and small group markets. Policyholders whose health insurers have rejected claims and who have exhausted internal appeals would be able to access the ombudsman office for assistance.

Yay, the states get an ombudsman! And he or she can only be tapped if individuals "exhaust internal appeals"; that is, beg their insurers to stop cheating them. And since the states will be establishing the office themselves, they'll set the budgets and choose the staff - meaning that we'll potentially be leaving enforcement of insurance regulations in Texas and South Carolina, for example, to Rick Perry and Mark Sanford.

Ultimately, those fighting for a public option are fighting for some way out of this Chinese box, where insurers have control over the health care you receive, and can just as easily deny your coveage as they can allow it. All of the regulations in the world won't mean a thing without proper enforcement, and this won't cut it.