Reuters has an eye-opening investigation today showing how the health-insurance company Assurant Health (formerly called Fortis) systematically targeted sick patients for “rescission”—where insurers pick expensive customers and find technicalities to dump them.
A computer program and algorithm targeted every policyholder recently diagnosed with HIV for an automatic fraud investigation, as the company searched for any pretext to revoke their policy. As was the case with Mitchell, their insurance policies often were canceled on erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators.
The great investigative journalist Murray Waas is on the case here, getting hold of “previously undisclosed records” from a case that went to the South Carolina Supreme Court involving a 17-year-old who sued (and won $10 million) Assurant for dropping him. The records come out of that case:
By winning the verdict against Fortis, Mitchell not only obtained a measure of justice for himself; he also helped expose wrongdoing on the part of Fortis that could have repercussions for the entire health insurance industry.
Waas reports that the news was found in two judge’s order denying Assurant motions. And the courts found that Assurant covered its moves up:
“The lack of written rescission policies, the lack of information available regarding appealing rights or procedures, the separate policies for rescission documents” as well as the “omission” of other records regarding the decision to revoke Mitchell’s insurance, constituted “evidence that Fortis tried to conceal the actions it took in rescinding his policy.”
And Waas is excellent to tie in Assurant’s dirty actions with its CEO’s testimony to Congress in favor of rescission:
On June 16, 2009, the House Energy and Commerce Committee, held a hearing on the practice of rescission by health insurance companies, and among the industry executives who testified was Don Hamm, the CEO and President of Assurant Health.
Hamm insisted before the committee that rescission was a necessary tool for Assurant and other health insurance companies to hold the cost of premiums down for other policyholders…
He also suggested that those who had their policies rescinded by Assurant had attempted to intentionally mislead his company: “Unfortunately, there are times when we discover that an applicant did not provide complete or accurate medical information when we underwrote the risk,” Hamm said.
Waas follows this, as a reporter should when encountering a lie, with some “you’re full of it” graphs:
But state regulators, federal and congressional investigators, and consumer advocates say that in only a tiny percentage of cases of people who have had their health insurance canceled was there a legitimate reason.
A 2007 investigation by a California state regulatory agency, the California Department of Managed Health Care, bore this out. The DMHC randomly selected 90 instances in which Anthem Blue Cross of California, one of WellPoint’s largest subsidiaries, canceled the insurance of policy holders after diagnoses with costly or life-threatening illnesses to determine how many were legally justified.
The result: The agency concluded that Anthem Blue Cross lacked legal grounds for canceling policies in every single instance.
What’s interesting to me is how little coverage this case got in the press until now. A Factiva search finds that coverage was limited to a 480-word Associated Press story and a Buffalo News editorial—neither of which reported on the systematic rescission of HIV-infected customers of Fortis/Assurant.
Why not? This was information in the public record, involving a major case (at least in South Carolina), on one of the biggest public issues of the age—and involving serious wrongdoing by a $9 billion-a-year company against a sick kid.
It’s a great testament to Waas and Reuters that they dug this up. This story could more easily have been one of the many (more these days, with the gutting of newspaper newsrooms) that slip through the cracks.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at firstname.lastname@example.org. Follow him on Twitter at @ryanchittum.