Insurer revoked HIV patients' coverage

[Rolfe]

Because it is very very unlikely. There are over 200 million Americans covered by private insurance. Note the three largest health insurers rescinded approximately 20,000 policies over a 5 year period. There is data missing there, and that's just three companies (though WellPoint and United alone account for 67+ million people), so let's say the real number is... 10 times that amount. Let's say there were 200,000. That's maybe .1% of all policies in the country. The vast majority of Americans will not face this issue.

I remember having this discussion once before. It may be 0.1% of all the policies in the country, but that's a very misleading statistic.

First, it doesn't seem to apply at all to people who have their health insurance through work - it's mostly just private policies they do this to. I think your figures there include employment-based policies, and if they do, that's a huge chunk of people the problem just doesn't apply to.

(I understand that a small employer who has an employee develop a very expensive condition may have their corporate policy revoked, or the premiums jacked up to unaffordable levels, but that's a slightly different situation. It's also very scary, but I don't think it would appear in these statistics.)

Second, the companies are being extremely selective in which policies they scrutinise. If you've never had more than a few small claims, you could have lied in your teeth all over your application and the chances are it won't be spotted. If your claims add up to less than you're paying in premiums, hey, they're cool with that! Get cancer, though, and see how well-covered you are.... er, no you're not.

So it's only a small percentage of people who are ever in the firing line to be hit with this. People with private insurance policies, who then develop a serious (expensive) illness. We had figures on this before, but I can't remember the exact percentage. It might have been about 18% of these that are actually rescinded.

These people are of course the most vulnerable people in the health insurance pool. They don't have an employer to fight their corner, and they've just been diagnosed with something life-threatening. These are the people being targeted, and if you're one of them, your chance of being rescinded is (correct me if I've got that wrong) about 18%.

Apart from the effect on these individuals, there's a big reason why everyone should be concerned about this. People lose their jobs. There's a recession. It's not always easy to find another one. What are you going to do in the mean time? Buy a private policy, probably.

Also, times are hard for companies. Some of them are cutting back. One of the areas cut back on in some places is health benefits. Some places are stopping cover for spouses and children. Some are even stopping it altogether. What are you going to do if that happens to you? Buy a private policy, probably.

It's fairly clear from the evidence that these policies are underwritten and their premiums calculated on the basis that about 18% (I think) of policyholders who develop the most serious illnesses will be cut loose. These are people who have plenty to worry about already, and who don't have a hope in hell of finding another insurer at that stage.

I think this is rather different from "picking out horror stories". It's a systematic feature of the set-up, and it's being vigorously pursued and defended by the companies involved.

It would be analogous to a casino being allowed to return a bet and not pay off on a long shot bet where the house loses.

That is exactly right. If you've played at that casino and never won, or only had small-ish wins, you'd never know there was any problem. After all, they only welsh on 18% of the punters who have really big wins! That's only 0.1% of people who play the tables altogether. Chances are you've never even met one of these people. Sure, where's the problem?

Rolfe.

 

[Rolfe]

(I have no idea how that "Death Panel" stuff got so much media traction in the first place)

"A lie has got half way round the world before the truth has got its boots on"?

It got so bad they were showing US anti-healthcare-reform commercials over here, in the news bulletins, and it was absolutely appalling. I saw one with a staged scenario of a frail old lady in bed, and the "socialised healthcare" system deciding she wasn't worth spending any money on at all.

It was absolutely terrifying. If you have a frail elderly mother (and yes I have one of these), the commercial would have frightened you rigid. I was practically crying, just watching it, and I knew it was a lie.

The premise was that they had taken the "QALY" calculation, which decides which expensive drugs are worth licensing for NHS availability, and falsely applied it to all healthcare. Yes, the NHS doesn't cheerfully accept every wildly expensive anti-cancer drug that gets a product license. There has to be a limit. Tens of thousands of pounds so allow someone to linger on his deathbed for an extra two weeks is unlikely to be funded. That's what it's all about. And sometimes people on the wrong end of a borderline decision get upset. (And as Architect notes, there are clear legal channels they can pursue to get such a decision reviewed.)

However, even if this expensive intervention isn't going to be funded for that frail old lady, or anyone else, everyone still gets normal "standard of care". The implication in that commercial was that if someone was dying and had a poor quality of life, that all treatment would be stopped and the patient wouldn't even get an aspirin or a bedpan.

We don't have "death panels". It's fairly clear the USA does, in certain circumstances. It's an odd thing I've noticed - just about every objection from Americans to universal healthcare hinges on a problem the US system already has, and universal systems either don't have, or don't have any more of than the US system has at present.

Rolfe.

 

[Darat]

It WAS usual policy. It wasn't legal, and they lost in this case, but how many other similar cases did they get away with? Enough to make £10 million worth it?

...snip...

Actually Rolfe I think what they did was legal; what got them in this instance is that they had made a factual mistake and based their decision on that mistake. The judges may have thought that their actions were reprehensible and so on but that doesn't mean they were actually illegal.

Sadly I can't see anything in this case and decision that would make the insurance companies stop this practice.

And this does not seem to be a practice limited to the USA, UK health insurers have also come under a lot of criticism for having similar policies. Which is hardly surprising since such insurance companies legal obligation is to maximise profit and value for their shareholders, not to provide funds for health care

 

[Fishstick]

To understand why 0.5% of the people Assurant covers is a lot of people – a jarring, terrifying, probably criminal lot – you need to understand a little bit of math. You need to understand just enough math to understand what Don and his legal team are not telling you. You need to understand conditional probability. And the folks at Assurant are counting on the fact that you don’t.

Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.

An individual adult insurance plan is roughly $7,000 (varies dramatically by age and somewhat by sex and location).

It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn’t make a lot of sense for the insurance company to take the nuclear option of blowing up the policy. $11,487 in claims is less than two years’ premium; less than one if the individual has family coverage in the $12,000 price range. But that top one percent, the folks responsible for more than $35,000 of costs – sometimes far, far more – well there, ladies and gentlemen, is where the money comes in. Once an insurance company knows that Sally has breast cancer, it has already seen the goat; it knows it wants nothing to do with Sally.

If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two. You have three times better odds playing Russian Roulette.

More at tauntermedia.

 

[Rolfe]

Thank you, Fishstick, I really should get a system of saving these links. That was the argument I was remembering from the last time we had this discussion.

Mojo, how do you do it? (If anyone hasn't noticed, Mojo is quite spookily able to pinpoint practically any old post or link that's relevant to the SCAM debate.)

So, it's maybe 15% of the big claimants who will be dumped, but if you're an enormous claimant, it might even get to be 50/50.

I shouldn't say this, I know, but some people in my family took the boat west in the late 19th century when times were hard in Scotland. I am so, so glad great-grand-daddy wasn't one of them.

Rolfe.

 

[fishbob]

Because it is very very unlikely. There are over 200 million Americans covered by private insurance. Note the three largest health insurers rescinded approximately 20,000 policies over a 5 year period. There is data missing there, and that's just three companies (though WellPoint and United alone account for 67+ million people), so let's say the real number is... 10 times that amount. Let's say there were 200,000. That's maybe .1% of all policies in the country. The vast majority of Americans will not face this issue.

That doesn't make it right of course. Our system needs to fix that and the pre-existing condition issues, and certainly a host of other issues, and we need to implement a UHC of some kind.

However, IMO, there is some danger in over-doing horror stories (and similarly, vilifying one segment of the health care industry, which has been a blatant, yet ham-fisted strategy in some circles for the past several months), just as there is in picking out horror stories from the the UK, Canada, etc. as proof that the entire system is evil and wrong. Just as British people and Canadians bristle when a UHC opponent picks some anecdote from either country to "prove" that your systems are terrible, the same can happen here. Millions of people have health coverage and do fine. The worst I have personally had were one or two very minor issues. Could something like this happen to me? Sure. Is it very likely? No.

We certainly shouldn't ignore problems like these by any means, but if you overdo the criticism or over-generalize, people will get defensive. It's human nature.

Using your numbers, the insurance companies rescind 1 in a 1000 policies - which must be be a very significant percentage of the actual numbers of the insured who contract catastrophic illnesses and need expensive care. Seems like the vast majority of Americans who get really sick will indeed face this issue. In the context of the entire health care system, it's a much bigger issue than you think.

 

[ARubberChickenWithAPulley]

I remember having this discussion once before. It may be 0.1% of all the policies in the country, but that's a very misleading statistic.

First, it doesn't seem to apply at all to people who have their health insurance through work - it's mostly just private policies they do this to. I think your figures there include employment-based policies, and if they do, that's a huge chunk of people the problem just doesn't apply to....snip]/quote]

I don't disagree, but this doesn't negate the point of my post. You asked why Americans can be "so sure" it won't happen to them. And the answer is because, for the vast majority of Americans, it simply won't. It is a systemic failure, but it is one that impacts a relatively small amount of people.

The individual insurance market is lousy and needs to be fixed. The system is drastically skewed toward employer-based insurance (particularly large employers) and individuals are at a serious disadvantage. I doubt anyone would dispute this. And this isn't only the fault of insurance companies: the laws themselves skew toward employer-based insurance (see ERISA, for example, which essentially exempts large, self-funded employers from state insurance mandates).

But again, the issue of rescission, specifically, is a pretty easy one to fix, particularly compared to all the other issues out there.

 

[Ducky]

Using your numbers, the insurance companies rescind 1 in a 1000 policies - which must be be a very significant percentage of the actual numbers of the insured who contract catastrophic illnesses and need expensive care. Seems like the vast majority of Americans who get really sick will indeed face this issue.

Several members of this forum have faced it as well, including me. It's not unusual among those that get sick to experience or know someone who has experienced this.

 

[ARubberChickenWithAPulley]

Seems like the vast majority of Americans who get really sick will indeed face this issue. In the context of the entire health care system, it's a much bigger issue than you think.

Well sure, if you exclude all the people who will not face this issue, of course you can say, "Many people will face this issue."

Several states have already drastically tightened the reins on this practice. I sure won't dispute that it needs to be stopped. It's a horrific practice. So why not fix it? Why not fix it tomorrow? It's telling they've had all kinds of hearings and political posturing on this and done nothing about it. They could fix this particular issue with or without a full reform of the system.

 

[Ducky]

Well sure, if you exclude all the people who will not face this issue, of course you can say, "Many people will face this issue."

Several states have already drastically tightened the reins on this practice. I sure won't dispute that it needs to be stopped. It's a horrific practice. So why not fix it? Why not fix it tomorrow? It's telling they've had all kinds of hearings and political posturing on this and done nothing about it. They could fix this particular issue with or without a full reform of the system.

Those that face this issue don't have the funds to heavily lobby politicians. Medical bills tend to get in the way of that.

 

[fishbob]

Well sure, if you exclude all the people who will not face this issue, of course you can say, "Many people will face this issue."

See Fishstick's post.

 

[Ducky]

See Fishstick's post.

How many of you damned fish people are posting here? Stop confusing me!

 

[Rolfe]

Well sure, if you exclude all the people who will not face this issue, of course you can say, "Many people will face this issue."

You're not quite getting it. The set of people who will probably face the issue is the set of people who get expensive illnesses. Exactly the set of people who need the cover.

It's like someone else said about the casino. They happily take your money so long as you're losing, or only winning small amounts. Then you win the jackpot, so they demand to see your ID, and tell you that you were never eligible to play for some reason, sorry, bye-bye.

You can't be OK with a casino that's doing that, even though 99.5% of the punters never have their IDs checked. (I know you want the system reformed, I'm just trying to point out that it's not quite the small problem it seems from your figures.)

Rolfe.

 

[Rolfe]

There's another little point that should be highlighted from the "unconscionable maths" link.

People lie on their insurance forms, of course, and that is a serious problem. But let’s not forget that the very nature of the forms is designed to create inaccuracies, and it doesn’t matter in the slightest how minor the error may be once the company comes looking to get out of its policy.

It is in the health insurer’s interest to have application fraud, not only because it saves time and expense on the front end, but also because it lets them get out of any policy that isn’t going well for them. If the health insurer had to verify the information – if, in essence the insurance company had to behave as an accredited investor with adequate expertise to make a decision without reliance – it wouldn’t have the opportunity to bail out. It would catch more genuine liars, but many of these liars would have turned out to be healthy, profitable customers, and what the carrier really wants is a population devoid of expensive claims, not devoid of liars.

I've seen a TV programme where one of the executives was challenged over the application form. The customer was supposed to fill it out themselves. A number of the questions used technical medical terms that many people would not know the meaning of. Not the real example, but a bit like asking if there was any history of "myocardial infarction" in the family, and the person answers no, because they don't know that means a "heart attack".

The executive in the TV interview didn't know what several of the conditions mentioned on his own form were. One of the rescission cases highlighed in the Senate committee report was someone who hadn't recorded a history of COPD on his application, because his doctor had never called the condition COPD to him.

There is at least a credible suspicion that the forms themselves are deliberately designed to maximise the chance of an inadvertent error happening in as many applications as possible, so that as many as possible can potentially be rescinded if the need subsequently arises.

Rolfe.

 

[Thunder]

health insurance is a business. they made a business decision. why should they be forced to pay to cover a very expensive disease.

what are ya...a Communist?

 

[Dave Rogers]

It's like someone else said about the casino. They happily take your money so long as you're losing, or only winning small amounts. Then you win the jackpot, so they demand to see your ID, and tell you that you were never eligible to play for some reason, sorry, bye-bye.

You can't be OK with a casino that's doing that, even though 99.5% of the punters never have their IDs checked.

There's an old urban legend about a con-man who raffled a $1000 gold watch at $1 a ticket, and sold about 5,000 tickets. The eventual winner came back to him and complained that the watch was actually a cheap fake in gold-plated brass, and didn't even work, so the con man refunded the winner his $1. Why would the 4,999 losers have any grounds for complaint?

The difference here, it seems, is that the insurance companies aren't even refunding the original stake.

Dave

 

[Unabogie]

I'm living this right now, and time will tell (if the bill does not pass on Sunday) what will happen.

Early last year, my wife had surgery. Shortly thereafter, my company's insurer, BCBS, informed us that they were dropping us after five years because California law allowed them to drop companies with 50% of employees living out of state. Bear in mind, we have four employees, and had two in each state for four years before this happened. So, we scrambled around for new insurance. None of the agents we talked to had ever heard of this rule, but they looked it up, and there it was. So, what do we do? Fire someone? Hire someone just to tip the balance? I tried pricing private insurance but none of the Oregon insurers would cover my wife, because she has a "pre-existing condition". She would only be covered by high deductible crap.

Luckily, seriously luckily, we found some new group insurance, because three weeks later, my boss had a massive stroke (he's only 40 years old with two small kids).

He's racking up millions in costs (his ICU bill alone was $800,000). Honestly, he's likely to be needing care for years.

Now, in six months, United Health Care will put our policy up for review. In our system, nothing protects us. Nothing. There's a loophole there, somewhere, and right now someone has the job of finding it so they can drop us. And when they do, his family will go bankrupt. A guy who ran his own business, paid his taxes, created jobs, and did everything right, will have one serious illness ruin his family's life.

 

[Rolfe]

But Unabogie, this only affects about 0.1% of the population (or 0.5%, depending on who you're reading). It's insignificant! I mean, look at all these fairly healthy people walking around having their small claims for the odd course of antibiotics met quite satisfactorily. None of these have any complaint. You're blowing this out of all proportion.
[/sarcasm]

I literally have no clue why you guys have put up with this for so long, never mind why some people are still arguing in favour of the status quo.

Rolfe.

 

[Rolfe]

The difference here, it seems, is that the insurance companies aren't even refunding the original stake.

Actually, I think they are.

I was watching Sicko online, and in several places in that film the camera scans letters and other documents. You can read them if you freeze-frame. I was doing that to get some further details of the cases that were being highlighted (they're not all exactly as Moore represents them, though I do think he's right a lot more often than he's wrong), and noticed this point in a rescission letter. The letter said they were cancelling the insurance and refunding all the premiums paid to date.

Rolfe.

 

[JoeTheJuggler]

You're not quite getting it. The set of people who will probably face the issue is the set of people who get expensive illnesses. Exactly the set of people who need the cover.

It's like someone else said about the casino. They happily take your money so long as you're losing, or only winning small amounts. Then you win the jackpot, so they demand to see your ID, and tell you that you were never eligible to play for some reason, sorry, bye-bye.

You can't be OK with a casino that's doing that, even though 99.5% of the punters never have their IDs checked. (I know you want the system reformed, I'm just trying to point out that it's not quite the small problem it seems from your figures.)

Rolfe.

And, as with the casino analogy, the amounts of money are disproportionate to the number of cases. The people whose policies are rescinded are exactly those with disproportionately high medical costs--the ones that will never (over their entire lifetimes) pay in anywhere close to what they need to take out of the system.

NB: the casino analogy is just an analogy. Casinos would NEVER be allowed to pay back a winning bet and pretend the bet was never placed (rather than pay off the winnings)--especially on an extreme long shot win, something that happens only rarely to begin with.

Not even once.

So the fact that this happens tens of thousands of times in the health insurance racket is deplorable.