Insurers Deliberately Confuse Policyholders and Dump the Sick

A couple of years ago, when Sen. Jay Rockefeller of West Virginia asked me to testify about little-known health insurance industry practices at a hearing of his Senate Commerce Committee, I initially was reluctant. I knew that if I was completely honest, my life would change forever.

What he was asking me to do was to disclose practices that have contributed to the growing number of Americans without insurance, the even faster growing number of us who are underinsured, and the phenomenal increase in insurance industry profits over the years, even as the ranks of those without coverage swelled.

The purpose of the hearing was to determine what Congress could do to require insurance companies to provide more pertinent and comprehensible information to their enrollees and prospective enrollees to help them understand what they were buying. What could the government do, the senators wanted to know, to help consumers figure out their benefits, compare different policies, and truly understand what would be covered and what wouldn't, and what their total financial obligations would be, including out-of-pocket costs, in the event of sickness or injury?

I agreed to testify in hopes that, as an insider -- an insurance industry executive for two decades -- I might be helpful as members of Congress drafted this important part of larger legislation to reform the U.S. health care system, especially the health insurance industry. Without disclosure, it's hard to understand what you're paying for -- and what you can count on in return.

Two long-time advocates of greater transparency joined me on the panel: Karen Pollitz, then research professor at Georgetown University's Health Policy Institute, who would later join Health and Human Services (HHS) Secretary Kathleen Sebelius' consumer information and insurance oversight education team, and Nancy Metcalf, senior editor at Consumer Reports. Both of them encouraged the senators to require insurers to provide not only useful and understandable information but to do so in a standard format. Without that, they argued, consumers still would not be able to compare one health plan with another.

Insurers Deliberately Confuse Customers

I couldn't have agreed more. In my remarks, I told the committee how insurers deliberately confuse their customers and dump the sick -- all so they can satisfy their Wall Street investors.

I went on to say that insurers "make promises they have no intention of keeping, flout regulations designed to protect consumers, and make it nearly impossible to understand -- or even to obtain -- information we need."

This was deliberate, I told the committee, because the more confused and ill-informed consumers are, the more money insurers make off of them.

Members of Congress heard us. The legislation that finally reached the president many months later included requirements for insurers -- and employers that offer coverage to their workers -- to be more up-front and honest with us.

Last week, the Obama administration released the long-anticipated disclosure rules that insurers and employers will have to comply with starting next year. In announcing the new rules, Sebelius said the new "summary of benefits and coverage" would make it possible for the first time for consumers to makes apples-to-apples comparisons between one health plan and another.

One of the things that most impressed me with Karen Pollitz's testimony back in 2009 was her suggestion that this summary of benefits and coverage be displayed in a format like the "Nutrition Facts" labels on food products.

I was pleased to see last Wednesday that HHS is proposing rules that would largely accomplish what Pollitz recommended, although some consumer advocates said they thought the rules should have gone further. That's undoubtedly true, but what the administration is proposing is far more than consumers have today.

"Obamacare" Will Force Insurers to Be Clearer

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By March 23 of next year, two years after President Obama signed the Affordable Care Act into law, insurers will have to provide information not only about the premium but also about the overall deductible of a certain policy. They will also have to disclose, among other things, whether the health plan requires policyholders to use certain doctors, if referrals to specialists are required and whether there is a limit on a policyholder's expenses and on what the insurer will pay.

Additionally, insurers will have to provide definitions of certain terms and to provide examples of the costs that consumers could expect to pay under a given health plan for, say, having a baby or being treated for diabetes.

As you can imagine, the insurance industry is pushing back, saying insurers and employers need more time to comply and warning that compliance will cause the cost of policies to rise.

There is no doubt about it, complying with the new disclosure requirement will mean that insurers will have to spend some money they've never been willing to spend before to provide us with the information we need in language we can understand.

The tab is likely to be about $50 million, according to the Obama administration.

In response to the proposed new rules, America's Health Insurance Plans (AHIP), the lobbying group for insurers, issued this statement:

Health plans increasingly provide user-friendly online tools and clear materials to make sure that consumers understand the benefits and costs of their health insurance policies. The benefits of providing a new summary of coverage document must be balanced against the increased administrative burden and higher costs to consumers and employers.

Hogwash. First, consumers need information before they enroll in a health plan, not just afterwards. The online tools and materials AHIP referred to in its statement typically are available only to people already enrolled. Second, insurers can comply with the new rules without charging consumers and employers another nickel. All the insurers will have to do is redirect some of the billions of dollars they already spend on marketing, advertising, sales and underwriting every year, activities of little if any value to most consumers.

Author Wendell Potter, former head of PR for CIGNAAHIP claims to represent more than 1,300 health plans. Well, between 2001 and 2010, just the five largest of those 1,300 collectively made more than $76 billion in profits. If just five companies made that much money, imagine how much all 1,300 of them pulled in.

The insurance industry comprises a bunch of very prosperous and profitable corporations that could spend $50 million to comply with these new rules -- and finally give us information they should have been providing all along -- and not even miss it.

It would be hardly more than a rounding error to even one of the big companies.

It's about time the government took action to end these companies' practices that -- yes, I'll have to say it again -- "make it nearly impossible to understand, or even to obtain, information we need."

Comments

I sued an insurance company for breach of contract. The whole ordeal took three years and ended up costing them upwards of $800K in lawyer/legal fees (though they never admitted guilt). During one deposition their in-house MD who made a determination on my health without ever setting eyes on me bragged how she had developed a complex script for the handlers that helped them successfully dump 90% of patients with the same life-threatening illness I've been living with for years. This is not capitalism in that it is not a clear product or service, honestly delivered to a consumer in exchange for an easily identifiable price. The right wing loves to protect these industries in the name of the free market but this is not free market - the power dynamic is teetered so much in their favor that this is closer to fraud than free market capitalism.

I agree with everything said, but one crucial point : that this isn't free market capitalism. In a hyper-individualistic (almost Ayn Randian) society, where government, and pretty much any institution that used to be called "public" is now the enemy of individual liberty, where corporations - entirely free of democratic oversight - get to behave, and even have the rights of individuals, virtually without restraint, what you get is perfect laissez faire capitalism. Where actors no longer feel the fabric of society, their obligations to others around them, "there is no society" as mrs. thatcher famously remarked. Welcome to the original American dream.

Actually, it's not a free market at all. Not even close. The regulations - established by governments, state and federal - are very much tilted in favor of the interests of the companies, not consumers. Barriers to entry and innovation are deliberately set very high to discourage true competition, which is the essence of free market capitalism. The result is a cabal of government-protected oligarchies. This is true not just for insurers but for most corporate enterprises, and is largely responsible for the mortgage-based meltdown of our economy.

For your continued efforts in acknowledging the truth regarding insurance practices. This specific article is absolutely on point. I'm an attorney and very familiar with healthcare issues. I've attempted to not only understand my own insurance policy (when I had healthcare insurance-I'm currently working for myself and cannot afford it even though I'm in optimal physical condition), and for relatives when they have been wrongfuly denied coverage. When an employee is on an employer based plan, an employee usually gets a one page summary (at most) of the benefits plan. They are then directed to the administrator with any questions. The administator will tell them to go online for a breakdown of their particular plan. (sounds easy for the most part--for the generation still working). Once one signs into their online benefits page, however, one quickly realizes that one has more questions than answers about one's coverage. Thus, one is directed to an insurance number for the plan. Upon calling the insurance number, one is directed to the plan administrator--many questions are meant to be left unanswered so claims can be easily denied, or to create a frustration level and insureds will surrender. It's nothing short of criminal.

The health and life insurance titans did not rise to their present level of obscene profits by being honest and forthright. So, with decades of practice, expect them to continue this creative lying, finding loopholes in the laws and regulations that allow continued confusion, and to continue bribing (a.k.a "campaign contributions") corrupt members of both parties in order to continue to hold for ransom the health of private citizens. With the recent Supreme Court decision that removes from them accountability for their bribes such abuses can only continue to increase in frequency and magnitude. The problem, of course, is the extremely low, or non-existent ethical standards of MOST of the members of both the Congress and the Senate. They have entered a 24/7/365 campaign cycle which is more for their own personal gain than any civic improvements. They outlaw insider trading, rightly so, but exempt themselves from that law so they can personally benefit from what they learn as members of the various congressional committees during their closed sessions. They enter Congress moderately wealthy and leave millionaires. Having taken bribes, they attempt to bribe their constituents with "ear marks". One Senator from my state of Nebraska has "ear marked" $1.8 Billion dollars to various "projects" around the state. That's $1,000 for every man, woman and child in the state. If the citizens don't repudiate these bribes then they deserve the government they get.