How an insurance company targets cancellations

Shortly after they were diagnosed with breast cancer, each of the women learned that her health insurance had been canceled. There was Yenny Hsu, who lived and worked in Los Angeles. And there was Patricia Reilling, a successful art gallery owner and interior designer from Louisville, Kentucky.

Neither of these women knew about the other. But besides their similar narratives, they had something else in common: Their health insurance carriers were subsidiaries of WellPoint, which has 33.7 million policyholders — more than any other health insurance company in the United States.

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. WellPoint declined to comment on the women’s specific cases without a signed waiver from them, citing privacy laws.

That tens of thousands of Americans lost their health insurance shortly after being diagnosed with life-threatening, expensive medical conditions has been well documented by law enforcement agencies, state regulators and a congressional committee. Insurance companies have used the practice, known as “rescission,” for years. And a congressional committee last year said WellPoint was one of the worst offenders.

But WellPoint also has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies, federal investigators told Reuters. The revelation is especially striking for a company whose CEO and president, Angela Braly, has earned plaudits for how her company improved the medical care and treatment of other policyholders with breast cancer.

The disclosures come to light after a recent investigation by Reuters showed that another health insurance company, Assurant Health, similarly targeted HIV-positive policyholders for rescission. That company was ordered by courts to pay millions of dollars in settlements.

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.

“People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end,” says Peter Harbage, a former health care adviser to the Clinton administration. “Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key.”

In a statement to Reuters, WellPoint said various specified criteria trigger rescission investigations, including certain types of medical claims. The company said it changed its rescission practices to ensure they are handled appropriately after a 2006 review of its policies prompted by public concern over rescission.

WellPoint also said it created a committee which includes a physician for making rescission decisions. The company also noted that it established a single point of contact for members undergoing an investigation and enacted an appeals process for applicants who disagree with the original determination.

During the recent legislative process for the reform law, however, lobbyists for WellPoint and other top insurance companies successfully fought proposed provisions of the legislation. In particular, they complained about rules that would have made it more difficult for the companies to fairly — or unfairly — cancel policyholders.

For example, an early version of the health care bill passed by the House of Representatives would have created a Federal Office of Health Insurance Oversight to monitor and regulate insurance practices like rescission. WellPoint lobbyists pressed for the proposed agency to not be included in the final bill signed into law by the president.

They also helped quash proposed provisions that would have required a third-party review of its or any other insurance company’s decision to cancel a customer’s policy.

A WellPoint spokeswoman on Thursday denied such lobbying took place.

The new law does leave open the possibility of reform in this area, these sources say. The reason, they say, is that much of the new legislation is essentially a roadmap, with regulations to be decided later.

“The lack of specificity doesn’t mean that nothing is going to be done,” said a senior congressional staffer who has played a key role in the health reform debate. “The law grants HHS (the Department of Health and Human Services) the discretion to promulgate regulations. This is very much a work in progress.”

Among other things, the staffer said, the White House could revisit proposing tough new regulations requiring third-party review of policy cancellations.

Victoria Veltri, the general counsel of Connecticut’s Office of Healthcare Advocate, a state agency that investigates complaints by policyholders, says she has seen the success of such a process in her home state. One company, Aetna, has voluntarily agreed to engage in the third party review, with what she described as favorable results.

“I haven’t seen an Aetna case in our office since they went to the third party review process,” she said. “It’s a powerful tool to have a third set of eyes required before someone is rescinded.”

For its part, WellPoint said it began offering third-party reviews in 2008.

A senior Obama administration official said he remained confident that mandatory third-party reviews of rescissions is not entirely out of reach.

“It might take some wrangling with the insurance industry, some strong-arming, maybe even use of the presidential bully pulpit,” he said on condition of anonymity.

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2 Responses to "How an insurance company targets cancellations"

  1. Mightymo  April 23, 2010 at 1:01 pm

    Although I am essentially unhappy with the lack of teeth that the current Healthcare Reform bill was passed with, I firmly believe that something had to be done.
    The current measure was hit hard by Lobbyists, and Republicans alike. In the end, whether anyone wants to admit it or not, the bill was compromised in order to meet the desires of the Republicans, and of course their lobbyist bosses.
    But as this article mentions, simply by having one foot of the American public in the door we continue to have avenues to make changes to the current legislation that can and will add teeth for our welfare.
    I would have prefered to see legislation that made stronger changes immediately, but considering how long we’ve waited for what we have, I can wait a little longer knowing that we are now on the right path.

    • woody188  April 23, 2010 at 2:33 pm

      Yeah, that made a lot of sense, compromise for Republicans to still vote no on the final bill.

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