healthy4u: rescission

A few weeks ago, we <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-leaders-prosper-despite.html">discussed</a> the cognitive dissonance produced by huge salary boosts for top executives of health care companies with miserable ethical track records.  One of our examples contrasted a long list of ethical violations by US giant health insurance company/ managed care organization WellPoint and the huge raises given its CEO and top executives.  Now more ethical questions are being raised about WellPoint. Rate Hikes Retrospectively for Golden Parachutes An op-ed published in several California newspapers (here <a href="http://www.sonomanews.com/articles/2010/04/15/opinion/doc4bc7c85a64e96634362792.txt">via the Sonoma Index-Tribune</a>) claimed that the huge rate hike that WellPoint's California subsidiary proposed earlier this year, an action that helped to revitalize the US legislative health care reform process, was meant to recoup costs of a previous merger that the company had agreed not impose on its policy-holders: <blockquote>Nobody at Anthem Blue Cross, the firm that's now a poster boy for out-of-control health insurance premiums, likes remembering the company's days of high anxiety back in 2004, when California's then-Insurance Commissioner John Garamendi was holding up its $18 billion deal to take over Thousand Oaks-based WellPoint and its California Blue Cross subsidiary. A frequent resister of insurance rate increases, he at least wanted to make sure Anthem didn't pass along the inflated price it paid for WellPoint to Blue Cross customers. So he refused for months to sign off on the merger, a form of passive resistance that threatened to hold up the entire deal, which also involved WellPoint insurance subsidiaries in other states. ...in the process, he achieved some things for California consumers: Anthem formally agreed to forego any rate increases for Blue Cross customers to cover the costs of the merger, which increased more than $2 billion during the delay as WellPoint shares rose from $91 to $113 between the day the deal was announced and the day it went through. The company also promised to invest $200 million over 10 years in under-served communities through California's Healthy Families program, plus another $15 million on children's insurance programs and $50 million for training nurses and operating clinics in California. It wasn't as good as keeping California Blue Cross a California company, but at least it was something. 'Was' now appears likely to be the operative word, because there is no way the cost of medical tests, doctor and hospital fees and medical supplies has risen 39 percent in one year, a claim made by Anthem executives while testifying before Congress and state legislative committees. Nope, it's now clear that, even if Anthem doesn't admit it, a good part of its rate increase would go to replenish corporate cash spent on the WellPoint takeover. It's been just over five years since that deal was completed, with Anthem adopting the WellPoint name for its parent company, much as North Carolina-based NationsBank renamed itself Bank of America after taking over the B of A. The Anthem tag was then hung on California Blue Cross. That's enough time so the corporation can conveniently maintain it has lived up to its written commitment not to make customers pay for its high-priced acquisition - while in reality making them do just that. For certain, the huge price increases Anthem may now assess violate the spirit of its agreement with Garamendi, even if they might not violate the letter of that deal.</blockquote> Note that this article did not make explicit what  "costs of the merger" Mr Garamendi did not want policy-holders to pay for.  As <a href="http://www.usatoday.com/money/industries/insurance/2004-11-09-anthem-wellpoint_x.htm">contemporaneous coverage</a> of the negotiations by USAToday made clear, these included golden parachutes for some of the executives involved. <blockquote>Commissioner John Garamendi was the last major stumbling block to the $16.4 billion deal, delaying the merger of a piece of the company, Blue Cross Life & Health, over which he had jurisdiction. His main concerns were costs to policyholders and the size of executives' golden parachutes, estimated at $200 million to $600 million. WellPoint CEO Leonard Schaeffer alone is expected to get a package worth $53.5 million in cash, stock options and pension payments when the deal is completed.</blockquote> Now, of course, it appears that the policy-holders are being called upon to retrospectively reimburse the company for the outrageous amounts it gave to executives back then, who may turn out to have been the biggest beneficiaries of the merger. Turning Administrative into Patient Care Costs Then, an <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/04/17/AR2010041702658.html">article</a> in the Washington Post reported how WellPoint was reclassifying administrative costs as patient care costs to fulfill an upcoming requiement of health care reform to spend at least 80 percent of premiums on health care. <blockquote>The idea was simple enough: Make sure that health insurers spend the vast majority of their revenue on patient care, instead of using it for things such as advertising, profits and executive pay. To that end, the new health-care law says an insurer must give money back to consumers if it devotes less than 80 percent of premiums to paying medical claims and improving care. For insurers serving large groups, the target is 85 percent. But even before the health-care overhaul was signed into law last month, one of the nation's largest insurance companies reclassified certain expenses in a way that increased its so-called medical-loss ratio. In January, WellPoint began including under medical benefits such costs as nurse hotlines, 'medical management,' and 'clinical health policy,' a WellPoint executive said in a March briefing for investors. </blockquote>To be clear, while it may be that "nurse hotlines" actually involve care for patients, it is hard to fathom what "medical management" by an insurance company means.  Certainly, "clinical health policy" is not direct patient care. Targeting Breast Cancer Patients for Insurance Policy Cancellation At least the above two cases were only about money. The third case affects patient care. A <a href="http://news.yahoo.com/s/nm/20100422/bs_nm/us_wellpoint_cancer">Reuters report </a>showed how WellPoint deliberately targeted every patient who developed breast cancer for a fraud investigation, often resulting in findings of minor irregularities in insurance applications that the company used as pretexts to retroactively cancel the patients' policies. Many of these patients then could not get needed cancer care. <blockquote>...WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators. Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information. WellPoint declined to comment on the women's specific cases without a signed waiver from them, citing privacy laws. That tens of thousands of Americans lost their health insurance shortly after being diagnosed with life-threatening, expensive medical conditions has been well documented by law enforcement agencies, state regulators and a congressional committee. Insurance companies have used the practice, known as 'rescission,' for years. And a congressional committee last year said WellPoint was one of the worst offenders. But WellPoint also has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies, federal investigators told Reuters.</blockquote> Not only did this seem heartless and unethical, it demonstrated the hypocrisy of WellPoint's leadership. <blockquote>The revelation is especially striking for a company whose CEO and president, Angela Braly, has earned plaudits for how her company improved the medical care and treatment of other policyholders with breast cancer.</blockquote> Specifically, <blockquote>Singling out women with breast cancer for aggressive investigation with the intent of canceling their insurance stands in stark contrast not only to the public image WellPoint cultivates for itself but also to the good work it does for many other policyholders with breast cancer. WellPoint CEO Braly has taken a strong personal interest in women's health issues. Foremost among them is how to increase services to people with breast cancer. The company prides itself on being one of the United States' largest corporations with women at the helm. Besides Braly, two high-powered, politically connected women sit on WellPoint's board: Susan Bayh, the wife of retiring Democratic Sen. Evan Bayh of Indiana, and Sheila Burke, who was chief of staff to former Senate Republican leader Bob Dole. On Braly's initiative, WellPoint has funded groundbreaking studies about the disparities in quality of health care to minority women -- including women with breast cancer. WellPoint has worked to encourage mammography for at-risk women. Personalized letters -- followed up by phone calls -- are sent to more than 80,000 women between the ages of 52 and 69 if they have not had a mammogram in the past year. The company conducts automated calls for women ages 40 to 69 to make sure they are getting mammograms. Once diagnosed, WellPoint has set up an 'Breast Cancer Resource Center' for its policyholders to help them 'navigate the complex health care system.' And in May 2009, WellPoint's charitable foundation, the WellPoint Foundation LLC, provided a grant for the American Cancer Society for its 'Hope Lodges,' which allow cancer patients and family members free lodging and support while receiving care far from home.</blockquote> The only explanation provided in the article for this behavior was that politically correct concerns about womens' health issues only go so far, money is more important. <blockquote>Why would WellPoint on the one hand work to improve health care for women with breast cancer while automatically investigating every single woman diagnosed with breast cancer for possible cancellation of their policies? Karen L. Pollitz, a research professor at the Health Policy Institute at Georgetown University, offers one possible explanation: 'It is important for these companies' profit margins that they get rid of policyholders with expensive diseases,' she said.</blockquote> I would add also that these profit margins provide the excuses for baronial compensation for the company's top executives.  Parenthetically, the article also noted that WellPoint had lobbied against provisions in the health care reform bill that might have threatened its ability to retrospectively cancel insurance policies after their holders got sick: <blockquote>Many critics worry the new law will not lead to an end of these practices. Some state and federal regulators -- as well as investigators, congressional staffers and academic experts -- say the health care legislation lacks teeth, at least in terms of enforcement or regulatory powers to either stop or even substantially reduce rescission. 'People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end,' says Peter Harbage, a former health care adviser to the Clinton administration. 'Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key.' During the recent legislative process for the reform law, however, lobbyists for WellPoint and other top insurance companies successfully fought proposed provisions of the legislation. In particular, they complained about rules that would have made it more difficult for the companies to fairly -- or unfairly -- cancel policyholders. For example, an early version of the health care bill passed by the House of Representatives would have created a Federal Office of Health Insurance Oversight to monitor and regulate insurance practices like rescission. WellPoint lobbyists pressed for the proposed agency to not be included in the final bill signed into law by the president. They also helped quash proposed provisions that would have required a third party review of its or any other insurance company's decision to cancel a customer's policy.</blockquote> Furthermore, an <a href="http://www.huffingtonpost.com/jane-hamsher/wellpoint-lobbyists-axed_b_548220.html">article</a> on the Huffington Post noted that a former WellPoint executive seems to have written a good part of the health care reform legislation: <blockquote>As Marcy Wheeler reported last year, the Senate Finance Committee bill was written by former WellPoint VP Liz Fowler, who left her position at the insurance company in February 2009 expressly for the purpose of helping the committee to draft the health care bill. And when Max Baucus did a 'victory lap' after the health care bil passed, he expressly thanked Fowler for her work: 'I wish to single out one person, and that one person is sitting next to me. Her name is Liz Fowler. Liz Fowler is my chief health counsel. Liz Fowler has put my health care team together. Liz Fowler worked for me many years ago, left for the private sector, and then came back when she realized she could be there at the creation of health care reform because she wanted that to be, in a certain sense, her profession lifetime goal. She put together the White Paper last November-2008-the 87-page document which became the basis, the foundation, the blueprint from which almost all health care measures in all bills on both sides of the aisle came.'</blockquote> Summary To make this more personal than these posts usually are, I wonder how WellPoint CEO Angela Braly sleeps in whatever luxurious accomodations her eight-figure compensation affords her?  I wonder how all the other current and former WellPoint leaders who styled themselves great proponents of "womens' health issues" can live with putting profits ahead of the care of breast cancer patients? Adding this latest list of ethical offenses to those we discussed earlier, WellPoint is beating out the heavy corporate competition as an example of the hypocrisy produced by putting imperial CEOs and their trusty hench-people ahead of every other consideration.  It has also become a premier example of how self-interested leadership can raise costs, decrease access, and degrade clinical care.  It further shows how compensating health care leaders to the point where they become imperial also grants them the power to fend off most threats to their power.  (Consider what health care reform might have become if it were orchestrated by people really interested in improving care, controlling costs, and increasing access, rather than by imperial CEOs who just wanted to become more imperial.)  If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

Pay for Hypocrisy for Health Insurance Executives

A few weeks ago, we discussed the cognitive dissonance produced by huge salary boosts for top executives of health care companies with miserable ethical track records. One of our examples contrasted …

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We have posted before about how certain health care insurance companies/ managed care organizations in California were found to have cancelled individual health insurance policies after the people holding them made substantial claims, supposedly rationalized by minor errors or omissions in the information the people supplied to the companies on their individual applications found after the claims were made. Several companies were subsequently disciplined by the state government for these "rescissions." See posts on rescissions by WellPoint <a href="http://hcrenewal.blogspot.com/2007/03/wellpoint-fined-1-million-for-canceling.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/07/more-than-half-of-wellpoints-policy.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2008/07/wellpoint-settles-but-has-it-become-too.html">here</a>, and by Health Net <a href="http://hcrenewal.blogspot.com/2007/11/health-net-statements-inoperative-in.html">here</a>. Executives of several such companies testified before a US congressional committee recently, with remarkable results, as reported by Lisa Girion <a href="http://www.latimes.com/business/la-fi-rescind17-2009jun17,0,5870586.story">writing in the Los Angeles Times</a>. First, by way of background, the article suggested that rescissions are widespread: <blockquote>An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period. </blockquote> Furthermore, <blockquote> The committee's investigation found that WellPoint's Blue Cross targeted individuals with more than 1,400 conditions, including breast cancer, lymphoma, pregnancy and high blood pressure. And the committee obtained documents that showed Blue Cross supervisors praised employees in performance reviews for rescinding policies. One employee, for instance, received a perfect 5 for 'exceptional performance' on an evaluation that noted the employee's role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care. </blockquote> Nonetheless, the executives were not prepared to abandon rescissions: <blockquote> Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive. The executives -- Richard A. Collins, chief executive of UnitedHealth's Golden Rule Insurance Co.; Don Hamm, chief executive of Assurant Health and Brian Sassi, president of consumer business for WellPoint Inc., parent of Blue Cross of California -- were courteous and matter-of-fact in their testimony. But they would not commit to limiting rescissions to only policyholders who intentionally lie or commit fraud to obtain coverage, a refusal that met with dismay from legislators on both sides of the political aisle. Sassi said rescissions are necessary to prevent people who lie about preexisting conditions from obtaining coverage and driving up costs for others. 'I want to emphasize that rescission is about stopping fraud and material misrepresentations that contribute to spiraling healthcare costs,' Sassi told the committee. But rescission victims testified that their policies were canceled for inadvertent omissions or honest mistakes about medical history on their applications. Rescission, they said, was about improving corporate profits rather than rooting out fraud. </blockquote> Also, <blockquote> Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show 'intentional fraud.' The answer from all three executives: 'No.' </blockquote> This is just amazing. Here are executives of three of the country's largest for-profit health care insurance companies/ managed care organizations asserting they will continue cancelling peoples' policies after they make claims, simply because of minor errors or omissions in the application documents that have no bearing on the particular claims, or on discrepancies between information provided by patients and doctors, given that patients may not have full access to or understanding of what is in their charts. What good is an insurance policy that is liable to be cancelled as soon as one makes a claim on it? Whatever these companies are selling, it is not insurance. Basing our health care system on their products is foolish, but that is what we are doing, and what many political leaders would continue to do. In my humble opinion, if we are going to have a system based on privately provided insurance, that insurance has to be honest, unlike what some of our largest insurance companies seem to be peddling.

Managed Care Executives Will Not Limit Rescissions

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