WP: Most large insurers are marketing consumer-directed plans. They do research and use selective data to persuade the public that these plans are popular and work as the companies say they do. There’s a lot at stake for these companies. They are building their business models around these plans, so they need to make them succeed. They need to counter research by others that shows many people don’t get the care they need because of the high deductibles that must be met.
TL: What else made it possible to get the stories you wanted?
WP: I quickly learned that reporters, because they’re so busy, haven’t learned as much as they should. I was able to take advantage of that. When companies would announce quarterly earnings, few reporters had any understanding of the details of the report.
TL: Do companies let reporters come visit for an entire day to learn the ropes, as they once did?
WP: Many companies won’t do it for fear that something might go wrong. An executive might say something he shouldn’t. A PR person puts him or herself at considerable risk by bringing a reporter in. Your job is on the line if stories are not flattering.
TL: Are insurers better able to control their messages now than, say, twenty years ago?
WP: Yes. For one thing, the media has lost interest in writing stories similar to the managed care horror stories they wrote in the 1990s, when insurers and employers were forcing people into HMOs. There is less coverage of the consequences to people resulting from insurance company practices. A lot of critical reporting is just not being done. Most reporters willingly accept a prepared statement that company executives and lawyers have written, and they feel their obligation is over. The calls we got were few and far between after the media lost interest in managed care.
TL: What insurance stories did reporters write most often?
WP: They wrote brief stories for investors, but wouldn’t go into the details of the important facts and numbers—such as a company’s medical loss ratio, which tells the percentage of premium dollars that the insurers pay out in claims. This is a closely watched measure by investors and Wall Street analysts, because it tells them how well a for-profit company is meeting investors’ earnings expectations.
TL: Did reporters ever ask about this?
WP: I can’t recall a reporter ever probing how insurers manage to meet Wall Street’s expectations through medical management and claims practices, which are key ways to manipulate the medical loss ratio and dump unprofitable accounts. Not once was I asked by a reporter what happens to people who work for small and mid-sized companies that get “purged” by insurers because their employees’ claims were causing the insurer’s medical loss ratio to move in the wrong direction from an investor’s point of view. No one ever asked me about the human consequences of satisfying Wall Street. Most reporters are happy to do a superficial job.
TL: How do companies manipulate the medical loss ratio?
WP: They look at expensive claims of workers in small businesses who are insured by the company, and the claims of people in the individual market. If an employer-customer has an employee or two who has a chronic illness or needs expensive care, the claims for the employee will likely trigger a review. Common industry practice is to increase premiums so high that when such accounts come up for renewal, the employer has no choice but to reduce benefits, shop for another carrier, or stop offering benefits entirely. More and more have opted for the last alternative.
TL: What tactics do they use in the individual market?
WP: They rescind policies when a review indicates that an individual has filed a lot of expensive claims. They will look for conditions that were not disclosed on the application. Often the policy likely will be canceled and the individual left without coverage. Sometimes people aren’t aware that they have a pre-existing condition. It might be listed in the doctor’s notes but not discussed with the patient.
TL: One way to end this practice might be to regulate it out of existence. Can we count on the industry to submit to more stringent regulation?
WP: The industry says it will accept more regulation, but the evidence is that it flaunts regulation on the books now. Insurers are often cited for violations of many state regulations, and they usually agree to settle with insurance commissioners or the attorney general and pay a fine. Fines are the cost of doing business, and even if the fine is several million dollars, it is inconsequential compared to profits insurers make.
TL: What can we expect from insurers as this reform discussion continues?