Sunday, February 24, 2008

Health Net ordered to pay $9 million after canceling cancer patient's policy

An arbitration judge slapped for profit health insurer Health Net with a judgment of $9 million in favor of a breast cancer patient who had her policy canceled as she underwent chemotherapy. What is frightening is the case highlighted the shameful practices of for profit health insurers. This patient, who had other insurance prior to Health Net, appears to have been aggressively courted by its sales force to switch because it would save her money. It certainly didn't save her from grief as see was saddled with over $100,000 in medical expenses, stopped chemotherapy for months until she could find a charity to cover costs, and unnecessarily worrying about whether she could get the right care, even though in good faith she bought coverage to avoid all of this.

It is a worrisome trend in California, which could be a sign of things to come across this country. Insurers under pressure from employers to slow rising healthcare costs while also seeing double digit rate increases in medical expenses are trying to find ways to do both. Just skipping the ethical discussion of whether for profit insurers should be in the business of healthcare, as any household, business, and government that expects to do well should know, what you bring in (income or revenues) must be more than what you pay out (bills or expenses). It appears insurers are trying to cancel policies for patients, who don't disclose their medical conditions (known as pre-conditions) on their applications retro-actively. According to the LA Times article, Health Net, like many other insurers do so because it is "necessary to hold down costs by weeding out people who may have failed to disclose pre-existing conditions on applications for coverage. They say cancellations happen infrequently." Wellpoint, one of the nation's largest for profit insurers is in favor of changing this practice as is Health Net. Blue Shield had no comment.

Health Net argued that they would have never provided coverage had they known about her weight and her use of fen-phen, a dietary drug that was shown to increase the risk of heart valve problems and pulmonary hypertension which can be fatal. Although obesity can increase the risk of breast cancer, there was nothing to her history to indicate a personal or family history of breast cancer.

What does this mean to you? While the practices illustrated in this case clearly are very disturbing, particularly giving bonuses to staff for meeting a set goal of revoking policies, it shows that insurers are having a difficult time balancing astronomical healthcare expenses and the inability to raise premiums to cover this. As a result, they are more aggressive and critical about who to insure. Without healthcare reform, it is easy to see what will happen. Those with even the slightest problem, like being overweight or obese, will be denied coverage. Those with existing medical problems won't be able to get coverage at all. In fact, ironically the only people who will be able to get coverage are the young and healthy, the group of people that can't afford coverage or are not required to have coverage to offset those who are ill. The underlying premise of insurance, that all chip in to cover those who have an adverse outcome, does not apply in the healthcare industry.

It is clear that there will be fewer insurers as weaker ones drop out of providing health insurance. But unless insurers can balance the revenue and expense equation, the end of the story is simply this, the government will step in and need to provide either financial guarantee and backing like they do for flood insurance or complete government takeover of the insurance industry. It's easy to bash insurance companies and their egregious behavior should not be condoned or tolerated, but is it a sign of how desperate the situation is in our healthcare system which is the most dysfunctional in the world?

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