Health Net: More reasons the health insurance industry must die

(another evil empire that needs toppling… – promoted by pfiore8)

It has been a bad week for Health Net in California. On Thursday, the health insurance giant was sued by the Los Angeles city attorney on behalf of all Californians for “illegally cancelling policies to avoid paying large claims.” On Friday, a judge ruled against Health Net in suit brought by a Southern California woman for cancelling her insurance as she was undergoing treatment for breast cancer. Although both cases might be viewed as victories, they are properly viewed as symptoms of a terminal illness not a cure.

Let’s start with the case brought the LA City Attorney.

The lawsuit, filed late on Wednesday by City Attorney Rocky Delgadillo, also accuses Woodland Hills, California-based Health Net of false advertising regarding “individual and family” policies held by about 135,000 individuals.

The lawsuit contends that, since 2002, Health Net has improperly denied benefits to more than 1,600 seriously or critically ill individuals and has delayed payments for care for “thousands” more.

Here we have a company that sold health insurance policies to “thousands” of people who eventually got seriously ill and needed to use that insurance. Rather than pay the bills, the company decided to endanger their health by cancelling coverage or delaying payment. Health Net knows that health providers react to cancelled insurance or delayed payment by denying access to medical care services. Health Net also knows that the cost-benefit ratio favors them cancelling the coverage and risking a possible lawsuit that will drag out for years.

Health Net spokesman David Olson said the city attorney’s claims duplicate those already addressed by state regulators.

“We view this lawsuit as reflective of a culture of blame and not a culture of solutions, which is what we need,” Olson said.

Yes, we need solutions. What is the solution in dealing with a company that deliberately endangers sick people?

Delgadillo also accused the company of incentivizing agents and its underwriting department with quotas and bonuses to find ways to cancel policies or delay paying for costly treatments.

Olson said the company had made payments in 2002 to employees who reached policy cancellation targets, but had voluntarily canceled that practice.

Olson omitted a few details. When California health insurance regulators investigated claims that Health Net was providing bonuses to underwriting agents for cancelling policies, the company lied about the practice and was fined 1 million dollars. A million dollars is a trivial fine for a company that pays its CEO 500k a month.

Delgadillo says Health Net’s application is purposely confusing and ambiguous, asking consumers “to make judgments about their medical conditions that few … are competent to make.”

The application “is essentially a trap” that allows Health Net to later cancel policies on the grounds they contain errors or omit pre-existing conditions, the lawsuit said.

One of those 1600 sick people in California dropped by Health Net was Patsy Bates, a 52-year-old grandmother who owns a beauty shop.  As a small business operator, she has to buy individual health insurance coverage.  In 2002, she was insured by an other company but was persuaded by a broker to switch to Health Net.  In 2004, she was diagnosed with cancer and had just started chemotherapy treatments when her policy was rescinded, leaving her with $129, 000 in unpaid medical bills.

Why did Health Net drop her coverage? They claim she failed to disclose her “true weight” and a minor heart valve problem.  According to Health Net during the hearings they would have never issued her a policy had they known about her “pre-existing” conditions. Based on those pre-existing conditions, most people over the age of 30 would not be issued individual health insurance policies.

Fortunately for Ms. Bates, the judge did not buy the lies of Health Net and ordered the company to pay her medical bills, $750,000 for emotional distress, and over 8 million dollars in punitive damages.  

Health Net Chief Executive Jay Gellert ordered an immediate halt to cancellations and told The Times that the company would be changing its coverage applications and retraining its sales force.

“I felt bad about what happened to her,” he said. “I feel bad about the whole situation.”

He felt bad about losing the case. If he felt bad about her personal situation, he would not have risked her life and forced her into court. She was forced to stop treatment until she could find a charity to cover her treatment.

Here is the statement issued by Health Net about the case.

While we do not agree with all of his conclusions, the arbitrator raised some serious concerns. Some of these concerns have already been remedied over the past few years, and we intend to address the remaining issues he raised. Effective immediately, we are doing the following things:

First, we will rescind no policies in the future without a binding external, third-party review process.

Second, we will ensure our application and underwriting process is clear and understandable, and that we get all necessary information before issuing a policy.

And third, we will do a comprehensive review of all parts of the process including enhanced broker review, training and education.

We will be making specific announcements in the coming weeks. We also will urge the passage of legislation in California to address these matters on a statewide basis.

We take this very seriously and are committed to resolving these issues.

What Gellert feels bad about is that this case went against the company and the loss was made public, encouraging others to follow suit. The story notes that “hundreds of cases in California have been settled quietly in confidential agreements.”  This case might set the precedent for a class-action suit, so the company waves some vague promises to find an external body (yet another parasitic entity) to give them the authority to rescind policies of sick people, improve their underwriting procedures after thousands of complaints by policy holders and state regulators, and educate their brokers how to better lie in court. That harsh appraisal is justified by the fact that Health Net and other companies been under fire for years for their rescinding policies.  Only when they lose a case with a large judgment in which the terms are publicly disclosed did Health Net promise to reform their process.  It is nothing more than a cynical CYA statement.

This case also featured internal company documents “showing that Health Net had paid employee bonuses for meeting a cancellation quota and for the amount of money saved.”

“It’s difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive,” the judge wrote.

Need more reasons to examine the attempted murder-by-spreadsheet practices of Health Net?  How about this one?

When Health Net held a conference call to discuss its third-quarter earnings, investment analysts pointed out one particular growth industry — covering mental health services for military members and their families.

Health Net President and CEO Jay Gellert agreed. He called the demand, fueled by the large number of Iraq and Afghanistan war veterans, a “positive surprise, which I think we anticipate to be ongoing.”

That’s right. Health Net is currently one of three insurance company conglomerates that provides care under TRICARE, the privatized plan that covers retired military officers and other federal government retirees.

There is no growth potential in employer group plans because companies are cutting back or outsourcing jobs. Individual policies are getting tricky unless mandates come without competition from a government program. So how do you keep up growth and profit margins?  Privatization of existing government programs, like as Medicare and military plans. With McCain pushing for a hundred years war in Iraq, there is gold in those veterans. An outstanding business opportunity to profit handsomely from the sacrifice, service, and suffering of our veterans.  

Instead, plans acknowledge they are looking for faster growth by administering government plans, including Medicare Advantage, Medicare Part D and military plans.

The aging American population is creating growth in Medicare, and the long wars in Iraq and Afghanistan are creating growth in military care.

Anywhere from $350 billion to $700 billion is needed to cover the lifetime disability and medical costs for the, so far, 1.4 million active-duty and reserve troops who have been deployed to Iraq and Afghanistan, according to a study by Harvard University government professor and former Clinton Commerce Dept. Chief Financial Officer Linda Bilmes.

What is the solution to the increasingly parasitic business practices of companies like Health Net? Health Net mouthpiece Olson pleaded for solutions.

One possibility would be class action lawsuits that could make the judgments against tobacco companies look like pocket change. Unlike the tobacco companies, there is no behavior engaging that is known to endanger health, such as smoking, on the part of consumers. People are just trying to get their medical bills paid without losing their home, business, or declaring bankruptcy. If the judgment were sufficiently large, then it might be possible to put a parasitic enterprise like Health Net out of business. The problem is that existing customers would be dumped into the market with pre-existing conditions that other parasitic companies will refuse to accept.  

Another possible solution would be to make executives and board of director members personally liable for all criminal and civil judgments against the company. However, existing laws prevents that from happening unless there is a paper trail showing these individuals were personally responsible. Most companies and executives are smart enough to erase paper trails.

That only leaves business as usual or moving toward universal single-payer care. Ultimately, the longer companies like Health Net are allowed to function with absurd overhead rates, with over 30% of every premium dollar going to advertising, executive compensation, litigation, fines, judgments, and a bloated bureaucracy, the harder it will be to reform the system. Health care costs per person in the United States are substantially higher than any other country in the world and the quality of care now ranks with that found in many “third world” countries.  The for-profit insurance companies are the problem, not part of the solution. Their behavior is the reason our costs are so high, access is limited for 47 million people without insurance, and quality of care is deteriorating due to reimbursement issues.

Imagine a company licking its lips to provide insurance to 1.4 million veterans with high rates of physical and psychological disorders resulting from prolonged exposure to combat.  The very same company that has paid its underwriters to find reasons to cancel coverage and promises to “cherry-pick” so they won’t have to “lemon-drop” to protect profit margins. Put yourself in Patsy Bates’ shoes and imagine being dumped after racking up big bills because you have cancer. The Dems need to stop bickering about mandates as the key to universal coverage and get down to the real business of holding health insurance companies accountable for the failing medical care system in the United States.