Insurers defend rescissions, take heat for lack of transparency

A former health plan executive calls their intentions into question before a Senate panel.

By Emily Berry — Posted July 6, 2009

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As lawmakers and stakeholders wrestle over the shape of health system reform, a few health plan executives have come under intense questioning before Congress, and their answers have prompted some public scolding from legislators of both parties.

First came testimony from executives with UnitedHealthcare, WellPoint and Assurant Health June 15 before the House Energy and Commerce subcommittee that was focused on why health plans rescind coverage from members who become ill.

The committee conducted a yearlong investigation into rescissions and found that insurers benefited financially from revoking coverage, sometimes even rewarding employees for finding reasons to cancel a policy that had proven costly to the company.

A series of tense points in the hearing culminated with subcommittee Chair Rep. Bart Stupak, (D, Mich.), asking the executives if they were prepared to commit to stop rescinding policies except in cases of fraud. All three said, "No."

Rep. Joe Barton (R, Texas), followed that response: "Doesn't it bother you that people are going to die because you insist on reviewing a policy somebody took out in good faith and forgot to tell you they had been treated for acne?"

Don Hamm, president and chief executive officer of Assurant Health, gave the only reply: "Yes, it does. We regret the necessity it has to occur even a single time."

All three executives said rescissions highlight the need for reform to include an individual insurance mandate and other changes that would make rescissions unnecessary.

A few days after the hearings, the trade group America's Health Insurance Plans wrote to Stupak to clarify the companies' position on rescissions:

"These organizations would only rescind a policy if the policyholder has materially misrepresented their known health status or history on an application. In reviewing the hearing materials, it is not clear that this was fully conveyed."

In an e-mailed statement after the hearings, WellPoint spokeswoman Cheryl Leamon reiterated that insurers want reform that would eliminate the need for rescissions.

"It's also important to note that rescissions are not about saving money; they are about stopping and deterring fraud and misrepresentation and their costs, which impact everyone," she said.

But health plans' defenses came too late for some legislators, who said rescissions were one more reason private insurers shouldn't be able to operate alone in the market.

"These insurance industry practices are precisely the reason we need a public health insurance option included in our proposal to reform the health care system," said Rep. John Dingell (D, Mich.).

The possibility of a government-run plan to compete with the private companies in the individual market has drawn some of the fiercest debate in discussions of health system reform. Days after the hearing on rescissions, AHIP and the BlueCross BlueShield Assn. formally came out against the creation of a public option as one choice in a new health insurance marketplace, saying it could drive them out of business.

At its June Annual Meeting, the American Medical Association's House of Delegates did not take a position on President Obama's proposed public health insurance plan, instead reaffirming its position that the AMA would "support health system reform alternatives that are consistent with AMA principles of pluralism, freedom of choice, freedom of practice and universal access for patients." The AMA said coming out for or against the public option would handicap its attempts to influence the health reform debate.

The health insurance industry scrutiny continued in Washington on June 24, as the Senate Committee on Commerce, Science & Transportation listened to former Cigna executive Wendell Potter describe a for-profit health insurance industry as driven above all to keep its profits -- and thus its stock prices -- high.

Once the head of corporate communications at Philadelphia-based Cigna and a former employee at Humana, Potter told senators that he doubted that health plan executives are truly interested in helping reform the health care system.

Potter was there to discuss transparency -- or lack of it -- in the health insurance industry's applications and claims forms, but he opened his comments with a more general criticism.

"For 20 years, I worked as a senior executive at health insurance companies, and I saw how they confuse their customers and dump the sick -- all so they can satisfy their Wall Street investors," he said. "Members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry."

Cigna spokesman Chris Curran defended the company's track record and intention to be part of successful health system reform.

"Although we respect that there are different opinions on the solutions, we strongly disagree with the suggestion that, motivated by profits, the insurance industry has deliberately attempted to confuse or unfairly treat covered individuals," he said in an e-mailed statement.

AHIP spokesman Robert Zirkelbach said the industry remains engaged in solving health system problems.

"Health plans are committed to this process and are working hard to help make this goal a reality."

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