A shout-out to Los Angeles Times staff writer Lisa Girion who has done great journalism exposing the flaws in the private insurance market. Her work is important since insurance companies are very likely to have the upper hand in any health reform that passes Congress in the next few years. None of the candidates’ plans call for replacing them, even though the insurers’ sacred principle of risk selection often clashes with the candidates’ stated objective of bringing everyone under the insurance tent. Risk selection means that companies can cherry pick the people they want to cover who, of course, are the healthiest in the bunch. They are not much interested in sick people who have needed medical care in the past.
Over the last several months Girion’s pieces (“Blue Cross Cancellation Called Illegal,” March 23, 2007; “Insurer Cited in Policy Rescissions,” July 3, 2007; “Health Insurers Tied Bonuses to Dropping Sick Policyholders,” November 9, 2007) detailed how Californians insured by the state’s big carriers, including Health Net, Blue Shield, and Blue Cross, have been engaging in a practice called rescission where the insurers deny coverage as soon as policyholders file a claim if they can find any shred of evidence these people were untruthful on their applications. Sometimes they’ve been rescinding policies without any evidence and have gotten in trouble with California insurance regulators. Girion has exposed their shenanigans and efforts by regulators to crack down on them. You get the picture. Suddenly families find themselves in Hardship City. The company cancels their policy, returns the premiums they’ve collected, and sticks them with a mountain of medical bills they can’t pay.
Last week came word that Blue Cross has elevated its rescission activities to a new level of sleaziness in an effort to keep costs down. Girion got hold of a letter Blue Cross of California sent to physicians telling them that the company had a right to drop policyholders who did not disclose “material medical history” including “pre-existing pregnancies.” They also sent along copies of applications that new Blue Cross policyholders had filled out. The gigantic carrier asked the docs to look for conditions these patients might have had that it could use to cancel their medical coverage.
The California Medical Association protested, Gov. Arnold Schwarzenegger scolded, and Hillary Clinton called the effort another “example of how insurance companies spend tens of billions of dollars a year figuring out how to avoid covering people with health insurance.” Blue Cross backed off, but not without admitting it had been sending as “many as 1,000 letters a month for years and had received no complaints.” In other words, it had never been caught.
The California flap shows just what happens when insurance companies capture doctors in their large networks and make them bow to their questionable methods for shedding unprofitable business, i.e., people who are sick and need care. It also shows what happens when the media does its job. For the candidates, Girion’s stories offer a lesson plan on how insurance really works. For news outlets, they provide an example of what they can do to check up on the health insurers in their own states.