“Say Hello To My Little Friend”

Posted on June 22, 2009
Filed Under Gekkonian Rationing |

Here’s a Podcast of this post:

 
icon for podpress  Say hello to my little friend [10:44m]: Play Now | Play in Popup | Download (302)

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Even Bob Laszewski - a strong proponent of both cost control in healthcare, and of the critical role of the private insurance industry in achieving it - is nonplussed by the insurance industry’s reply when asked by Congress last week to stop retrospectively, arbitrarily, and unfairly cancelling patients’ health insurance policies.

The practice, called “recission,” consists of an insurance company voiding a subscriber’s health insurance (after happily accepting premiums from that subscriber, often for many years) once they get sick. As Laszewski points out, it is legal and proper to cancel a policy if the subscriber is found to have lied on the insurance application about a prior illness that is material to the current illness - say, if you now seek medical care for headaches after you failed to tell the insurance company that you were previously diagnosed with a brain tumor. That, under contract law, is fraud, and voids the contract.

But insurance companies for years now have been practicing recission on subscribers whose insurance applications contained inadvertent and non-material innaccuracies. A nurse in Texas, for instance, had her insurance cancelled after she was diagnosed with breast cancer because she had failed to reveal that, years before, she had consulted a dermatologist about acne.

The insurance industry employs people whose job it is to comb the prior medical records of subscribers who are newly diagnosed with certain, expensive target medical conditions, looking for such tiny discrepancies - which they can inflate to “fraudulent” omissions  - on insurance applications. These “health insurance detectives” are awarded by their employers according to how much money their efforts can save the company.

As it happens, last week insurance executives were treated to a Congressional hearing on recission. After being subjected to a series of incredible stories (such as the one related by the Texas nurse) directly from the mouths of several harmed patients (or their surviving loved ones), and then after listening to withering commentary by both Republicans and Democrats on the House Subcommittee on Oversight and Investigations (whose investigation found that WellPoint Inc., UnitedHealth Group and Assurant Inc. had retrospecively canceled the policies of 20,000 sick subscribers over the past 5 years), executives from these three companies were asked by Chairman Stupak (D-Michigan) to commit to stop practicing recission unless intentional fraud could be shown.

All three replied, “no.”

Laszewski, a highly regarded commentator and a consultant to the insurance industry, reports it’s the “dumbest thing I’ve ever seen an insurance executive do. . . .And, I’ve been in the business for 37 years.”

It does seem pretty dumb, on the surface, at least.

Even the most stone-hearted among us can see that canceling the health insurance of a newly-diagnosed cancer patient, because she’d forgotten she’d required acne medicine before the prom 20 years ago, is just a bit unfair. One cannot even claim that the insurance executives were defending their recission policies in their reply to Chairman Stupak; rather, they were simply being defiant about it. One is put in mind of Tony Montana, bereft of friends, family, allies and bodyguards (albeit because of his own actions), threatened and surrounded by an army of heavily-armed assassins, screaming, “Say hello to my little friend!” then launching defiantly into a wild, bloody and spectacular suicide.

DrRich does not for a moment believe that 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., are stupid enough to publicly defy Congress, when doing so is against their own long-term interests.  Appearances to the contrary notwithstanding, they are not auditioning for a remake of Scarface.

This is not how an industry behaves which wants to court the goodwill of Congress at a critical juncture in its lifecycle. This is not the strategy of an industry that wants Congress to defy its own party’s President, and deny the creation of a competing “public option” (i.e., a Medicare-like insurance plan for everyone), or that is begging for another crack at figuring out itself how to bring healthcare costs into check.

Rather, it makes more sense to wonder how their public defiance on this matter - they would seem kinder if they proposed instead to place live puppies on a spit and roast them over an open fire during half-time at the Superbowl - suits their long-term interests.

Regular readers will know that DrRich has already supplied the answer. The health insurance industry is playing out their end-game. This is an industry that has shot its wad. It has had 15 years of nearly free-reign to implement whatever methods it can invent - dastardly and otherwise - to bring soaring healthcare costs under control, and has failed miserably. The insurance companies are entirely bereft of ideas, and the prospect that healthcare reform will somehow end up relying on them to find as-yet-unfound “efficiencies” - and worse, that any profits they generate from now on will depend on their ability to find them - must utterly scare the tar out of them.

As DrRich has pointed out, their great hope for One Last Windfall (before they fade away into oblivion from having to “compete” with a government-run “public option,” backed not by subscribers but by the full faith and credit of the U.S. government) is for a universal mandate to purchase health insurance, with government funding for millions of new subscribers.

This is why they threw in with the Democrats during our latest election campaign; why they have loudly called for universal healthcare coverage in contrast to their longstanding policies against it; and why they very publicly pressed their support for the Obama plan a few weeks ago. Their recent public utterings about wanting to avoid the public option, DrRich’s theory would suggest, is merely a bargaining position. In fact, they are completely reliant on universal coverage, in competition with a public option, for a reasonable chance at a few more years of profitability and growth before they finally pull the plug on their fundamentally failed business model.

Their incredible performance before Congress last week is entirely consistent with this theory. We have all heard the growing skepticism about Obama’s public option, not only on the part of Republicans, but also on the part of a critical minority of Democrats in Congress. And for the first time since the election, there is some question about whether President Obama’s healthcare reform plan will succeed in gaining sufficient support. How must an insurance industry desperately working their end-game view such falterings?

In this light, the stark, public “no” uttered by the three insurance executives to the incredulous Congresspersons last week makes sense. “Look at us,” they were saying, “See how evil we are. We are utterly devoid of human decency, ethical obligations, or a sense of fair play. If we behave this defiantly when we are mere supplicants to your eminences, just think how we will behave once you confirm us to spearhead the new healthcare system you are all now devising. We shall cry: Abandon all hope, those who rely on us for your healthcare, and behold the congressional dogs who placed us in this position of power over your life and limb!”

Universal coverage (on which the insurance industry depends for any hope of future profits) and the public option (to which the insurance industry can graciously capitulate in two or three or five years, once the unavoidable expenditures from all those new subscribers seriously threaten the windfall from all the new premiums) just got a major shot in the arm.

DrRich (a great admirer) is humbled at this rare opportunity to help Mr. Laszewski work his way through the labyrinth.

Comments

One Response to ““Say Hello To My Little Friend””

  1. Guiac on July 8th, 2009 8:44 am

    Don’t think anyone could have said it better. The model of insurance for health care failed long ago when it became apparent that what was needed is a finance model for health care since inevitably everyone gets sick, and insurance by its model is designed to manage rare events.

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