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Thread: 2 sides to every story....fact checking & recission

  1. #1
    Senior Member TXduckdog's Avatar
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    Default 2 sides to every story....fact checking & recission

    Question: How prevalent is recission(cancellation) of health policies based on inaccurate and/or false info provided by the insured? Does the insurer have a right to do so?

    I think this piece emphasizes the point that health insurance regulation and reform should be the objective NOT the whole health care process and certainly NOT a government controlled program or provider.



    In his speech to Congress last week, President Barack Obama attempted to sell a reform agenda by demonizing the private health-insurance industry, which many people love to hate. He opened the attack by asserting: "More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day."

    Clearly, this should never happen to anyone who is in good standing with his insurance company and has abided by the terms of the policy. But the president's examples of people "dropped" by their insurance companies involve the rescission of policies based on misrepresentation or concealment of information in applications for coverage. Private health insurance cannot function if people buy insurance only after they become seriously ill, or if they knowingly conceal health conditions that might affect their policy.

    Traditional practice, governed by decades of common law, statute and regulation is for insurers to rely in underwriting and pricing on the truthfulness of the information provided by applicants about their health, without conducting a costly investigation of each applicant's health history. Instead, companies engage in a certain degree of ex post auditing—conducting more detailed and costly reviews of a subset of applications following policy issue—including when expensive treatment is sought soon after a policy is issued.

    This practice offers substantial cost savings and lower premiums compared to trying to verify every application before issuing a policy, or simply paying all claims, regardless of the accuracy and completeness of the applicant's disclosure. Some states restrict insurer rescission rights to instances where the misrepresented or concealed information is directly related to the illness that produced the claim. Most states do not.

    To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."

    Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."

    The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."

    The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.

    These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

    If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.

    Later in his speech, the president used Alabama to buttress his call for a government insurer to enhance competition in health insurance. He asserted that 90% of the Alabama health-insurance market is controlled by one insurer, and that high market concentration "makes it easier for insurance companies to treat their customers badly—by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates."

    In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.

    Similarly, a Dec. 31, 2007, report by the Alabama Department of Insurance indicates that the insurer's ratio of medical-claim costs to premiums for the year was 92%, with an administrative expense ratio (including claims settlement expenses) of 7.5%. Its net income, including investment income, was equivalent to 2% of premiums in that year.

    In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.

    Responsible reform requires careful analysis of the underlying causes of problems in health insurance and informed debate over the benefits and costs of targeted remedies. The president's continued demonization of private health insurance in pursuit of his broad agenda of government expansion is inconsistent with that objective.

    Mr. Harrington is professor of health-care management and insurance and risk management at the University of Pennsylvania's Wharton School and an adjunct scholar at the American Enterprise Institute.
    Train the dog, the ribbons will take care of themselves.

  2. #2
    Senior Member dnf777's Avatar
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    You raise excellent points. My question back to you is, how do we gather valid, honest data? Do we trust the companies themselves? Do we trust accounting firms retained by those companies? (remember Arther-Anderson and Enron) Do we fund the gov't to do so?

    Every step of the process is subject to distortion, corruption and persuasion. Pure data is hard to comeby, whether looking at rat livers in a laboratory or economic conditions. Sometimes the truth is hitting you in the head, but proving it scientifically or legally is impossible.

    I have heard stories of policies being recinded (sp?) after a diagnosis of cancer because of an unreported pediatric umbilical hernia! I understand the need to honest history reporting, but do you remember EVERY course of antibiotics you've ever been put on for strep throat, UTIs, sinus or ear infections?

    If someone conceals they have a pre-existing cancer or have smoked for 50 years, that's one thing. Forgetting you had an ingrown toenail at 16 is another!

    You raised a very good point, and many more questions to go along with it
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    Senior Member Gerry Clinchy's Avatar
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    Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."
    Why doesn't O find some people who do their homework? It does not help his cause when his staff give him examples that are so easily refuted.

    In the case of the woman with breast cancer, it would appear that she might well have been rejected for the dx of a pre-cancerous condition. We might look to how insurors shared the high risks WRT auto insurance.

    It has often been mentioned that states require auto insurance; and, indeed, private insurors sometimes provide "high-risk pools" to provide "basic" coverage for high-risk drivers. The risk does not diminish, but the insurors within the state share the risk equally. By so doing, each insuror can make up some of the losses on the high risks with their profits from lower risks. OTOH, the cost of auto insurance is so high in Philadelphia that people often register their vehicle securing a policy, then cancel their insurance shortly thereafter. Some insurors did decide to withdraw from doing business in certain states if the risks were too high. Many also stayed here in PA.

    Historically, low-risk areas were "pooled" by insurors with Philadelphia so that people in Philadelphia could be given more reasonable rates than would be dictated by Philadelphia's actuarial claim experience alone. Over time those in the low-risk areas (Upper Bucks County was one of them) raised their voices about the inequity of the rates assigned to them (when just over the county line, rates were much lower). Right or wrong, there ain't no free lunch.
    G.Clinchy@gmail.com
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  4. #4
    Senior Member TXduckdog's Avatar
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    Quote Originally Posted by dnf777 View Post
    You raise excellent points. My question back to you is, how do we gather valid, honest data? Do we trust the companies themselves? Do we trust accounting firms retained by those companies? (remember Arther-Anderson and Enron) Do we fund the gov't to do so?

    Every step of the process is subject to distortion, corruption and persuasion. Pure data is hard to comeby, whether looking at rat livers in a laboratory or economic conditions. Sometimes the truth is hitting you in the head, but proving it scientifically or legally is impossible.

    I have heard stories of policies being recinded (sp?) after a diagnosis of cancer because of an unreported pediatric umbilical hernia! I understand the need to honest history reporting, but do you remember EVERY course of antibiotics you've ever been put on for strep throat, UTIs, sinus or ear infections?

    If someone conceals they have a pre-existing cancer or have smoked for 50 years, that's one thing. Forgetting you had an ingrown toenail at 16 is another!

    You raised a very good point, and many more questions to go along with it

    I think the answer to your questions need to be at the heart of the reform package. I think some type of independant "clearing house" could be a very wise instrument.
    Train the dog, the ribbons will take care of themselves.

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