The Bear Market Economics Phenomenon: Nothing Intimidates Health Insurers Like the Public Health Insurance Plan

June 19, 2009 - 11:37am ET

Most people don’t trust health insurance companies and with good reason. They are a powerful industry that is not easily prodded, pushed or intimidated into doing the right thing by their members.

Insurance companies routinely abuse the trust of patients and providers alike. A new report by Health Care for America Now outlines the habitual abuses perpetrated by health insurance companies, including leaving patients with high out-of-pocket costs, denying coverage for medically necessary care, preventing doctors from delivering care they feel is best for their patients, and unduly delaying reimbursement to patients and providers.

The report demonstrates how health insurance companies repeat the same abuses over and over again, despite being reprimanded and fined by state insurance agencies. For example, the report notes how the Texas Department of Insurance has fined United Healthcare millions of dollars for violating the state's prompt payment law. The 2007 fine, $4.4 million dollars, was “the second time in two years and the fourth time since 2001 that Texas fined United Healthcare for the same type of violation.”

But Texas is not the only state where United Healthcare has perpetrated that particular abuse. The report also gives examples of similar fines being levied in Arizona, Georgia, North Carolina, and Ohio. And that is just the tip of the iceberg.

Insurance companies are clearly not intimidated by state regulators. These companies seem to consider the fines they incur just the cost of doing business. How much money must they be saving by breaking prompt payment laws if they are willing to keep violating the law over and over again?

Particularly since sometimes they don’t even have to pay the fine. As I reported in my last post, California regulators have been too afraid to try to collect a $1 million fine against an insurer because it “is too powerful to take on."

Even in Massachusetts, which has some of the most stringent regulations on health insurance plans and a much touted health reform law that extended health insurance coverage through private plans to most of its residents, health insurers find a way around the rules. According to the Boston Globe

“The state's pioneering healthcare law requires residents to have insurance that meets minimum standards, but regulators are discovering many employers' plans test the limits by exploiting loopholes in the rules.

Regulators yesterday said that reviews of scores of health plans show many cap the benefits insurers pay each year on prescription drug coverage, exclude maternity coverage for dependents, or place an annual overall dollar limit on benefits.”

Health insurers aren’t even intimidated by Congress, as the Los Angeles Times reported:

“Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive.

The hearing on the controversial action known as rescission, which has left thousands of Americans burdened with costly medical bills despite paying insurance premiums, began a day after President Obama outlined his proposals for revamping the nation's healthcare system.

An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.

It also found that policyholders with breast cancer, lymphoma and more than 1,000 other conditions were targeted for rescission and that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses.

"No one can defend, and I certainly cannot defend, the practice of canceling coverage after the fact," said Rep. Michael C. Burgess (R-Tex.), a member of the committee. "There is no acceptable minimum to denying coverage after the fact."

The executives -- Richard A. Collins, chief executive of UnitedHealth's Golden Rule Insurance Co.; Don Hamm, chief executive of Assurant Health and Brian Sassi, president of consumer business for WellPoint Inc., parent of Blue Cross of California -- were courteous and matter-of-fact in their testimony.

But they would not commit to limiting rescissions to only policyholders who intentionally lie or commit fraud to obtain coverage, a refusal that met with dismay from legislators on both sides of the political aisle.”

Regulation doesn’t intimidate health insurers because they know they can get around it, or that, if they get caught, what they earn violating the regulations will more than make up for what they get fined. In fact, health insurers have called for more federal regulation as part of health reform. Does that mean insurers want to reform their ways? Don’t be fooled.

What insurance companies want is to stave off the one thing that truly intimidates them: having to compete on a level playing field against a public health insurance plan. Knowing that we will have the ability to walk away from the private insurance industry altogether if they keep abusing our trust is what frightens them, and what might just scare them straight in the future. As reported in The New York Times:

“Before Mr. Obama even takes office, insurance companies are raising questions about a central element of his plan that calls for creation of a new public insurance program to compete directly with private insurers.”

Unfortunately, the insurance companies seem to be swaying the Senate. Despite poll after poll after poll showing a vast majority of their constituents want the choice of a public health insurance plan, some Senators are caving in to the insurance lobby.

As Washington Post reports:

“A draft proposal in the Senate to overhaul the nation's health-care system would require most people to buy health insurance, authorize an expansion of Medicaid coverage and create consumer-owned cooperative plans instead of the government coverage that President Obama is seeking.”

Don’t let the Senate give in to the special interests by ripping the heart out of Obama’s health care plan! Learn more about a public health insurance option.

And then stand with President Obama and Dr. Howard Dean to demand the choice of public health insurance by writing your Senator today!