NETKING

Before I launch into a case by case examination of the claims, I’d like to share with you the role the health insurance industry played in creating this bill.

As many of you know, President Obama's point man in the Senate for health reform was Sen. Max Baucus. A June, 2009 story by Mike Dennison of the Montana Standard revealed that Baucus has received more money from the insurance and medical industries than any other member of Congress, and that money from these sectors accounts for a quarter of his total campaign contributions; Baucus accepted more than three million dollars from Big Insurance and Big Pharma between 2003 and 2008. Picking Sen. Baucus to lead a health insurance reform effort presented a conflict of interest, to say the least. 

But Sen. Baucus did not write the bill, at least not directly. So, who did?  On March 25, 2010, Mr. Baucus thanked the principle author, saying: 

“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.”

Yep. Liz Fowler, VP at Wellpoint, a health insurer, left Wellpoint and hired on with Baucus specifically to author the health reform bill! 

Fowler's last stint with Baucus was to assist with the creation of “Medicare Part D,” another instance where an alleged health “reform” was in fact a major giveaway of taxpayer dollars—in that case to Big Pharma.
Fowler's former employer, Wellpoint, is exactly the kind of insurer that health reform purports to regulate. In April, only a month after Baucus' thank you to Fowler, Reuters reported on Wellpoint's practice of post-claims underwriting, or rescission. This is the foul practice upon which I blew the whistle in Michael Moore's documentary, SICKO, and according to Reuters, Wellpoint was cited by Congress as one of the worst offenders! 

Rescission, for those not familiar, is the practice of cancelling an insurance policy retroactive to the date of its inception, rendering it as if it had never existed. Some health insurers in the individual and small claims markets have a practice of targeting patients with expensive claims or potentially expensive conditions, looking to find an inconsistency with the information on their application for insurance, so they can void out the policy  and thereby save money. 

According to Reuters, Wellpoint has nearly 34 million policyholders, more than any other health insurer in the country. And, in this instance, Wellpoint was targeting breast cancer patients for policy termination. As the article said: 

The women paid their premiums on time. Before they fell ill, neither had any problems with their insurance. Initially, they believed their policies had been canceled by mistake.

They had no idea that 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. 

If you haven't figured it out, let me spell out the implications of this. These were women who were being treated for breast cancer, and Wellpoint, instead of paying their claims in good faith, singled them out and rescinded their policies, leaving them, unless they were independently wealthy, with no way to pay for the medical treatment that their doctors prescribed to treat their cancer. 

And it was a Wellpoint VP that wrote the “health reform” bill. Please assimilate that. And note the irony of this last bit from the Reuters article:

In his push for the health care bill, President Barack Obama said the legislation would end such industry practices.
But 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.

The critics are right. Take it from me—a former insurance company insider—the Affordable Care Act's provisions aren't going to stop the practice, or even slow it down much. We'll talk about that later, since the claim that the Act will “end rescission” is a bragging point for the Democrats. 

You may be asking yourself, “Why would the health insurance industry look to reform itself in the first place? Wouldn't they be trying to block reform?” That's an excellent question. The answer, I believe, is that the insurance industry knew that change was coming, and they wanted to insure that the change would be implemented on their own terms. 

There has been a grassroots movement for single payor health reform, spreading like wildfire in this country.  At least ten states have  single payor legislation under consideration. And the documentary SICKO made the horrors of American health insurance the topic of dinner table conversation across the nation. In September, 2008, California governor Arnold Schwarzenegger vetoed a single payor bill passed by the California legislature. It was the second time in three years he had done so. Had “The Terminator” not vetoed the bill, twice, California would have become the first state in the nation to have universal, not for profit, single payor health coverage for its residents. And I am confident that the rest of the states would have followed suit over the next few years. 

Something had to be done to stop the stampede towards single payor. 

The slickest way to do it was to legislate against state-based single payor plans on the federal level, in such a way as to make it look like real insurance reform. And that's exactly what Congress, in collusion with Big Insurance, did. They enacted a “health reform” which cements in place the role of for-profit health insurance through federal statute, and which, as federal law supercedes state law, effectively blocks state-based single payor legislation. The bill as originally written would have blocked single payor forever and always. It was amended due to public pressure, but still blocks state-based reform until at least 2017, at which point the nationally mandated for-profit insurance infrastructure called the “health exchange” will already have been put in place. 

So there's your answer. Had universal single payor coverage been enacted in even one state, it would have been the camel's nose under the tent, and the rest of the camel would soon have followed in the form of other states implementing similar legislation. So Big Insurance worked with Congress to enact a reform bill that would contain some incremental reforms for consumers while blocking single payor legislation,  preserving the role of for-profit insurance and, through the individual mandate, expanding the slice of the pie for Big Insurance by requiring Americans to buy private insurance and subsidizing the purchase with their own tax dollars. 

So now let’s take a look at some of the myths circulating about this bill, and debunk them. 

“It will insure all Americans.” Not even close. The Affordable Care act expands the role of Medicaid somewhat. The biggest expansion happens with the private sector. By subsidizing low income Americans to buy private insurance, and imposing monetary penalties on otherwise uninsured Americans who refuse to buy private insurance, the Affordable Care Act effects a major expansion of the role of private insurance. By doing so, the Congressional Budget Office (CBO) predicts that by 2019 the Act will reduce the number of uninsured Americans from 50 million to 25 million. That's still a far cry from universal coverage. And much of the reduction will be accomplished by compelling Americans by means of monetary penalties to purchase private coverage.

“It will end the objectionable practice of rescission.” Nope. Not in the short term, anyway.  It does restrict the practice somewhat. Here is the pertinent portion of the Act:

SEC. 2712. PROHIBITION ON RESCISSIONS.
  A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.

Let’s talk a bit about what rescission is, how it works and what it does.
Let’s say you are seeking insurance under an individual, non-group plan, the type of private insurance you can get without being part of an employer group. You will be asked to complete an application that asks you some complex questions about your medical history, questions like “Have you during the past five years been diagnosed or treated for any injury, illness, disease or condition affecting the genito-urinary tract? If so, please explain?” You may also be asked to get a physical exam and provide the results to your prospective insurer. 

OK, fine, so they review the information, issue the policy, and are gladly accepting your premium payments.
But as soon as you get sick and your insurance company receives a bill that either exceeds a set dollar limit or which reports a potentially expensive or chronic diagnosis,  this signals your insurer that their payouts may exceed the amount they are taking in on your policy, making you a money pit as far as they are concerned. So they begin looking for ways to cancel your policy. 

The way they do this is by retrieving a copy of your application, and investigating your medical history over the past several years. The investigation can take as long as a year or even longer, and they are not paying your claims while they are investigating. You may well be unable to both pay your providers and keep paying your premiums, so the very process of the investigation can have the effect of pushing you off the policy. What your insurer is looking for is a discrepancy or inconsistency between your medical history and what you reported on your application for insurance. If they find it, they will use that inconsistency to either issue a rider excluding coverage for anything relating to the condition they discovered, issue a rate increase retroactive to your policy's effective date, or rescind your policy, meaning it is void from the effective date. Behind closed doors, we referred to this as “the three “R”s when I was doing these investigations for a third party administrator.  

What the rescission does is make it as if you never had insurance. If they paid out less than you paid in premiums, they will refund you the difference; if they paid out more than you paid in premiums, they will recover the excess from your health providers leaving you responsible for those bills. 

Does the “intentional misrepresentation” language give you protection if you filled out the application in good faith? Not necessarily. Let’s take the example of the question above addressing the genito-urinary tract. One woman who appeared in SICKO was kicked off her policy and left with thousands of dollars in unpaid bills because she did not disclose a yeast infection she had several years prior to her coverage. Most women, at some time in their life, get a yeast infection, and it is a stretch to call it an illness or injury. Many would not think to report this on an insurance questionnaire. But your insurance company can easily say “she knew she had it, she sought treatment for it, she did not report it, it was obviously intentional,” and rescind the policy. You can try to argue otherwise, BUT the truth is if the insurance company is determined to rescind your policy, in most cases they can make some sort of circumstantial case that your omission or misstatement was intentional and you will probably need to get a lawyer in order to fight it. If you are like most people in that circumstance, you are ill and without medical coverage and cannot afford to pay a lawyer and pay your medical bills at the same time. So they win. 

So the Affordable Care Act does NOT end the practice of rescission; it only restricts it somewhat, and it is disingenuous to claim otherwise. 

An additional note on the Act's “ending” rescission- the Act's language, which requires that resscissions be done only in instances of fraud or intentional misrepresentation of material fact, is ALREADY law in at least seven states, including my home state of New Mexico. In most of those states, this law has been on the books for years. So if you live in one of these states, the Act not only doesn't end the practice of resciscission, it makes absolutely no change to the status quo.

The Act does, beginning in 2014, implement “guaranteed issue,” which means they can't refuse to cover you on the basis of your past medical history. That should effectively do away with rescission on policies issued on or after the effective date of the guaranteed issue provision. If your policy was issued before 2014 then your insurer may still be able to rescind your policy. 

“It will end abuses and injustices by insurance companies.” Definitely not. And it's cruel to even suggest such a thing. An estimated 18,000 Americans die each year from “death by denial,” their insurers' refusal to cover lifesaving care. That's three times the number of deaths suffered in the September 11th World Trade Center attack, every year. The Act does little to change that, and, given that it greatly expands the slice of the coverage pie given to for-profit insurers, we may well see that number rise. Perhaps most significantly, as health industry whistleblower Wendell Potter recently pointed out, the Act does nothing to rein in the ERISA “protections” that deprive many Americans of their right to sue. 

ERISA, the Employee Retirement Income Security Act of 1974, bars those roughly 130 million Americans covered under employer health benefit plans from suing their insurance company or their employer for refusal to cover a treatment or procedure. They can bring suit in federal court, but if they do, there will be no punitive damages, and no pain and suffering. The only thing that they can win from their lawsuit is the monetary value of the denied service. This means that there is no meaningful downside for such plans if they decide to deny your desperately needed care even for the flimsiest of reasons – ultimately, the most you can do, if you are one of the few who fight it in court, is compel them to pay what they should have paid in the first place. 

So let’say that your husband and the father of your children needs a kidney transplant, your  employer's ERISA plan refuses to cover it, and the love of your life dies as a direct result.  Assuming that you sue, and win (and this would be you and your lawyer against the insurer's legal team, a David and Goliath battle from the onset), the Judge would award you nothing to compensate for the loss of your spouse, for your child's loss of a father, for the lifelong loss of income and child support. Not because he doesn't want to, the judge's hands are tied by ERISA and he can only order the plan to pay what they should have paid in the first place.
The Act doesn't change that. Not now, not in 2014, not in 2017, not ever.

The Act does limit a few egregious practices—but it doesn't keep your insurance company from refusing to cover your care because it is medically unnecessary, experimental, investigational, not a plan benefit, out of network, or any of the other 30 to 50 listed exclusions listed in the average health insurance coverage certificate. And it doesn't do much of anything to improve your options if your insurance does deny your claim, either. All that the Act does in this respect is require all insurance plans to HAVE an appeals process which would satisfy the ERISA requirements for such. That means no change for those insured through their employer, and little to no improvement over most state laws. 

All of the claims for the Act effectively ending ANY abuses, including bad-faith rescissions, are merely feel-good gestures in the absence of a regulatory body empowered to intervene in individual cases. Read the act carefully, and good luck finding any mention of a regulatory body empowered to do this.   I have to tell you, there are plenty of well-intentioned laws already on the books which for-profit insurance companies flout with impunity. Regulation in the absence of oversight and enforcement is simply ink on paper.
So expect those thousands of deaths by denial to continue, year after year, until more meaningful reform is implemented, or until we kick for-profit insurance to the curb in favor of a publicly administered system. 

“It limits insurance company profiteering.” To be exact, what the Act does do is limit the insurer’s loss ratio. The “loss ratio” is the split between the amount the insurance company pays out in benefits and the amount which goes to overhead and profit. The Act requires at least 80 cents of the premium dollar for individual and small group plans to go to medical expenses, and at least 85 cents on the premium dollar for other plans to go to medical expenses. Insurers with less than the mandated medical loss ratios would be required to issue a rebate to customers.  

By way of contrast, public plans such Medicare and state Medicaid plans typically have a MLR better than 95/5. 

In order to increase profits under a capped medical loss ratio, an insurer would need to either manipulate their business and accounting practices, decrease actual overhead, or increase both premiums and payouts so that profit-taking can also increase. You can bet that insurance executives were already strategizing how to game this one before the ink was dry on the legislation. 

You can bet on any variety of administrative expenses being reclassified as medical care on the insurance company’s balance sheets. For example, expect to see some portion of their advertising budgets being reclassified as “medical education.” 

Obviously, the devil is in the details with this provision of the Act. What are the details?  We don't know yet. The National Association of Insurance Commissioners was tasked with fleshing out this provision, determining what constitutes a medical versus a non-medical expenditure, and was given a December 31 (2010) deadline under the Act. The American Hospital Association, in a June 2 letter to the NAIC, called for close scrutiny in this area, stating that

Regulations implementing the new MLR provision should ensure that the allocation of
costs incorporates the following three principles:
* only payments to licensed professionals and entities that deliver health care services should be classified as health care services;
* costs and expenses that are classified as activities that improve health care quality need to meet specific criteria; and
* loss adjustment activities should be counted as administrative costs because they do not provide health care services or improve quality.

These are good recommendations. But it is hard to conceive of the final regulations being written so tightly and in such detail as to effectively eliminate the countless loopholes which insurance companies might otherwise exploit. Whether the final regulations will be meaningful, and how the Feds will enforce the regulations without an army of accountants and auditors remains to be seen. 

“It will lead to single payor.” As I explained earlier, it will effectively THWART grassroots efforts to enact single payor legislation, until at least 2017, and perhaps forever. The Act is written in such a way that its provisions must be waived in order for single payor reform to be enacted. The Act has a provision allowing that to happen, but not until 2017. But that's not all. Back to that pesky ERISA. 

Employee Health Benefit Plans (EHBPs) are exempted by ERISA from state laws governing insurance, and currently about half of all people insured through their workplace are insured through such EHBPs.  That's roughly 130 million Americans, nationwide. Because the waiver language in the Affordable Care Act does not waive this ERISA exemption, states can NEVER enact true single payor legislation. A true single payor plan would have to insure all individuals, and in doing so would necessarily replace the current network of employer-based health coverage. But it can't replace these EHBPs because they are shielded by ERISA from any state law which would do so.

That's it in a nutshell. There are some good things about the bill, which I haven't touched on in this column. I think the media and the Democratic Party have told that story. There are also some more bad things about it which I haven't even touched on here. But for those of us worried about the big-picture issues, the “Patient Protection and Affordable Care Act” falls tragically short of living up to its name. Under the Act, we can continue to expect death by denial to take thousands of American lives every year.  We can expect to still have 24 million uninsured Americans, even a decade from now. We can expect that medical expenses will continue to be the leading cause of foreclosures and bankruptcies for working families, and we can expect our health insurance system, in short, to be the most expensive, the most profitable, the most dysfunctional and the least humane medical reimbursement system in the developed world.