Wednesday, July 04, 2007

More Than Half of WellPoint's Policy Revocation Decisions Erroneous

We have posted previously about how US managed care organizations and health insurance companies like to publicize their warm and fuzzy qualities, while their track records often suggest that they place profits ahead of concerns about patients' welfare. For example, see this post on the continuing investigation of how Blue Cross in California, a subsidiary of for-profit WellPoint Inc., revoked individuals' health care policies after they made their first major claims.

Now Lisa Girion, writing in the Los Angeles Times, has reported:

BC Life & Health revoked 1,880 individual health insurance policies in California in 2004 and 2005, and a state agency that examined a sampling says it found that more than half the cases it reviewed were improperly handled.

The Department of Insurance said it studied 83 sample cases and issued citations in 49 of them, alleging 67 violations of fair-claims handling laws.

In one case, the department contended that BC Life, a Blue Cross company, told a policyholder in a letter that it rescinded coverage because of an undisclosed medical condition, even though the condition was clearly stated on the individual's application.

In another case, the department alleged that BC Life improperly rescinded a policy after miscalculating the period of time between treatment and the effective date of coverage. BC Life declined to reinstate coverage even after the department brought the error to its attention, according to a report issued by the agency.

The 67 citations could lead to fines of as much as $10,000 per sustained infraction, as well as follow-up examinations.

The report was posted on the department's website last week with little fanfare, even though it had been highly anticipated by consumer advocates and lawyers for policyholders who were suing BC Life and other insurers, challenging the rescissions as unfair and illegal.

The Department of Insurance launched an investigation last year when John Garamendi, now lieutenant governor, was the commissioner. The report marks one of the first occasions on which Insurance Commissioner Steve Poizner, who took office in January, has publicly weighed in on a health insurance issue.

'A rescission can be a financial death sentence when you're ill,' Poizner said in an e-mail. 'In my view, even one improper rescission is one too many. When it comes to rescissions, we are acutely aware that these are people's lives. They're not just numbers to us.'

Asked to comment on the report, a spokeswoman for Indianapolis-based WellPoint Inc., which owns BC Life, noted that the majority of the citations were for 'technical violations of the claims-handling processes' ....

The investigation by the Department of Insurance is separate from the investigation by the Department of Managed Health Care to which our blog post above referred.

That post noted how the insurance company's cancellation practices seemed to conflict with its public promises to improve "the lives of the people we serve."

So this post will note how the recent findings by the Department of Insurance contradict one of the prime rationales for handing control of health care to managers and executives, instead of health care professionals. That rationale, of course, was to bring efficient, competent, rational management to a field often deemed sloppy and wasteful. This was one reason that health care economists and other policy wonks, Stanford Professor Alain Enthoven in particular, wanted to break up the supposed "physicians guild" in the 1980s.

Since then, I know of few efforts to actually determine whether businesspeople's management of health care has met any standards of efficiency or competence. The report by the California Department of Insurance, showing an error rate greater than 50% for health insurance policy revocation decisions, suggests that the notion that businesspeople can run health care competently and efficiently is ridiculous.

But we know that putting businesspeople in control of health care has not restrained cost growth, another rationale for breaking up the guild.

And reading Health Care Renewal ought to provide convincing evidence that businesspeople's management of health care has too often put their own financial fortunes ahead of the needs of patients, and sometimes has been frankly corrupt.

So now that the guild has been broken up, what now, Professor Enthoven?


Anonymous said...

"what now, Professor Enthoven?"

Don't know what the perfesser's answer will be but I say let the entire health care system be taken over by the federal government. Business failed, doctors failed, that leaves government as the last, best hope. If government fails at this, the terrorists will have won.

And because health care is different, there will be no avarice, greed, incompetence, or corruption in government-run health care. So we don't have to worry about those things any more.

If this isn't done now, health care will only get more expensive.

--Stella Baskomb

Anonymous said...

I believe the "guild" was the one that Milton Friedman was referring to in his classic Capitalism and Freedom. Chapter 9.