Individual health plans come under scrutiny in California

Kevin Booth, MD, a spinal surgeon in Pleasanton, Calif., didn't think twice about performing a lumbar spinal fusion on his patient after going through the necessary authorization process with the patient's insurer, Blue Cross of California.

"We went ahead and performed the procedure and he did fine," said Dr. Booth, one of four physicians at the Northern California Spine Institute.

What happened next to Dr. Booth highlights a long-standing battle that physicians say they are fighting with not just WellPoint-owned Blue Cross of California, but also with insurers across the country after they try to collect payment from patients with individual health plans. He said Blue Cross, after surgery, refused to pay for treatment, citing "misstatements" on the patient's application for insurance.

In California, state regulators and plaintiffs' attorneys have accused at least five insurers of violating state law by finding loopholes or otherwise petty reasons to drop individual members who require large claim payouts. That law states that members can be dropped only for fraudulently or "willfully" misrepresenting their health history and that insurers must do their own investigation of a potential member's health history before providing coverage.

On Sept. 21, the Dept. of Managed Care fined Blue Cross $200,000 for dropping a patient in violation of that law. WellPoint has not admitted guilt, nor has it announced whether it would pay the fine or contest it. In October, the department also ordered Kaiser Permanente to reinstate a member who was dropped, the first time it had made such an order.

The plans say they can drop patients, a process known as rescission, for providing any misinformation, but it appears in California the regulators' actions are having some effect. A Los Angeles law firm in October said Blue Cross has agreed to pay the health costs of 70 plaintiffs and others who claimed they were illegally dropped. Blue Cross has not confirmed the settlement.

It was not known if Dr. Booth's patient would be among those in any settlement. But Dr. Booth said a lot of money is at stake: $120,000, including the doctor's $6,000 bill.

A problem elsewhere

Blue Cross of California said it will employ a new simplified insurance application that lowers the time a patient is required to recall his or her medical history from the past 10-15 years down to five years. In addition, the plan will create a rescission review committee that includes at least one medical doctor and will create an ombudsman to communicate with customers on rescission issues.

While those policy changes address what's happening to patients, the insurer is quiet about what it plans to do for physicians left with unpaid bills when a patient's insurance is cancelled.

"All we're prepared to respond to is the consumer side," said Robert Alaniz, a WellPoint spokesman. "We are not prepared to address the provider side of this argument at this time because of current litigation."

Physicians say the problem of individual insurance rescission doesn't stop in California. Those in organized medicine are saying rescission policies used against patients with individual plans are just as egregious as the efforts insurers use to find the slightest errors in claims physicians submit for reimbursement.

"Unfortunately, what Blue Cross of California was doing is not all that uncommon," said J. Edward Hill, MD, AMA immediate past president. "Expanding health insurance coverage to all Americans must be a priority for the entire health care industry. But when health insurers go out of their way to sabotage legitimate patient applications for coverage because of risk, the entire system is undermined."

For physicians, the biggest problem has been waiting for payment while the insurer decides whether or not to pay the claim, said Nileen Verbeten, California Medical Assn. vice president, Center for Economic Services. Verbeten says some physicians have waited for up to a year to hear whether the claim will be paid.

Bryan Liang, MD, PhD, executive director of the Institute of Health Law Studies at California Western School of Law, said what's happening in California is also happening with health plans across the country, but it's only now seeing the light of day because it's starting to affect middle-class populations who are increasingly buying individual plans as more and more employers drop health benefits.

"It's all about money," Dr. Liang said. "The profit margin is double in the individual market because they can pick and choose who they want. The physician is left holding the bag. Previously you saw this with immigrants and poor people. In those situations, if the insurer cut off the policy they didn't know to fight so that's why it went under the radar. Even if they did make a case, the Blues would settle for low amounts of money."

Meanwhile, a new study says the individual health plan market isn't an effective alternative for the nearly 46 million uninsured Americans.

According to the Commonwealth Fund, 89% of working-age adults who sought coverage in the individual insurance market during the past three years ended up never buying a plan because it was either too expensive, they were turned down because of a preexisting condition or they had a health problem that excluded them from coverage.

"We think the health plan market for individuals is broken," said Peter Warren, spokesman for the California Medical Assn.

Physicians say most of the uninsured are the working poor who make too much to qualify for Medicaid but too little to afford individual insurance plans.

The Commonwealth Fund study says 58% of applicants found that the individual health plan coverage was unaffordable. The study said two of out five people with individual coverage spent 5% or more of their income on premiums, compared with one of out seven people who had employer coverage.

America's Health Insurance Plans, whose members include more than 1,300 insurers, said it disagrees with the study's findings based on its methodology -- a telephone survey of more than 4,300 adults age 19 and older. AHIP spokesman Mohit Ghose said research from their survey of the experiences of 1.9 million policyholders and 3.2 million covered lives suggest 90% of people who apply for individual health insurance are offered coverage.

But Warren said health plans are creating serious problems for physicians who are facing increasingly difficult business decisions in their practices in light of recent reimbursement cuts from health plans and the federal government.