Saturday, March 24, 2007

WellPoint Fined $1 Million for Canceling Individual Insurance Policies in California

The Los Angeles Times just reported,

Blue Cross of California 'routinely' violated state law when it canceled individual health insurance coverage after policyholders got pregnant or sick, making no attempt to determine whether they did anything to merit such "harsh" treatment, according to a state investigation of practices that appear to be industrywide.

As a result of its unprecedented investigation, the Department of Managed Health Care on Thursday said that it had fined Blue Cross $1 million — an amount immediately criticized by canceled policyholders and consumer advocates as too small to matter to an insurer whose parent company, WellPoint Inc., earned $3.1 billion in profit last year on revenue of $57 billion.

Indianapolis-based WellPoint disputed the findings, saying it acted legally and that some rescissions are necessary to combat fraud.

The state investigation found that Blue Cross used computer programs and a dedicated department to systematically investigate and cancel the policies of pregnant women and the chronically ill regardless of whether they intentionally lied on their applications to cover up preexisting medical conditions — a standard required by state law for canceling individual policies.

Regulators examined 90 randomly selected cases of policy cancellations — out of about 1,000 a year in California — and found violations in each one.

'This looks like 'Rescission Inc.,' ' said Bryan Liang, director of the Institute of Health Law Studies at California Western School of Law in San Diego. 'It's clear if 100% of these individuals had their policies illegally pulled, that means that there's a problem. These are just the tip of the iceberg.'

What sort of insurance is it when the policy can be cancelled as soon as its holder makes a large claim, on the pretext that in retrospect something the policy-holder wrote on a complicated and hard to interpret application form was wrong?

Note that we most recently wrote about charges that the California Blue Cross unit of WellPoint was cancelling policies in this manner here.

Note also that this is the same WellPoint whose New York Empire Blue Cross and Blue Shield subsidiary recently misplaced a computer disc containing confidential information on 75,000 policy-holders (see story here).

Furthermore, this is the same WellPoint which settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see story here).

Finally, this is the same WellPoint whose retiring CEO earned more than $8.5 million in total compensation in 2005, and will be receiving a lump sum retirement payment of $31 million when he steps down (see story here).

Yet WellPoint advertises its "commitments" thusly,

At WellPoint, we are dedicated to improving the lives of the people we serve and the health of our communities. From the boardroom to the mailroom, every associate is expected to honor the company's commitments to our diverse customers, fellow associates, shareholders and the communities we serve - helping us become the most trusted choice among consumers.

Our business strategies mirror our commitment to providing affordable quality care to our members and the public. In line with our vision to become the most valued company in our industry, we must:

* Bring affordable quality health care and coverage to medically underserved communities
* Educate people to take an active role in their own health
* Work with our health care partners to improve quality of care
* Help shape public policy that makes health care more affordable and more accessible

Say what? WellPoint is a for-profit company. Its first obligation is supposed to be to make money for its share-holders. I won't comment on how successful it has been in that regard. It certainly has been successful in putting money in the pockets of its out-going CEO.

But how does a "commitment" to provide "affordable quality health care" square with cancelling individual subscribers who actually need to the insurance to pay medical bills? How does a "commitment" to "work with our health care partners to improve quality of care" lead to settling a RICO law-suit about withholding physicians' reimbursement?

It's funny how for-profit managed care organizations warm and fuzzy statements of purpose seem to contrast with how they operate in real life (see also the case of UnitedHealth's recent advertising here).

Maybe soon they will be retailing bridges across the East River in New York.

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