Health Insurers Sanctioned, Fined

It has not been a good few weeks for big US health insurance companies.  First was a report (e.g., per the Wall Street Journal) that three companies had been suspended from selling Medicare Advantage plans:

The U.S. government's Medicare program has ordered three health insurers--Universal American Corp. (UAM), Health Net Inc. (HNT) and Arcadian Health--to stop marketing to and enrolling new members in their Medicare Advantage health and prescription-drug plans, saying the companies violated regulations.

In particular,

Universal American was told to stop marketing to and enrolling people in its Medicare Advantage plans effective Dec. 5. The action doesn't affect current members or the enrolling of beneficiaries in the company's stand-alone Medicare prescription-drug plans.

Health Net had to suspend the marketing of and enrollment in its Medicare Advantage plans and stand-alone Medicare prescription-drug plans as of Friday, as the government said the company's conduct poses a 'serious threat' to enrollees. The sanction doesn't affect the status of current enrollees, however.

In a letter Friday to Theodore Carpenter, head of Universal American's Medicare Advantage business, the Centers for Medicare and Medicaid Services alleged the company has a 'longstanding pattern of prohibited marketing practices targeted to highly vulnerable populations in violation' of federal law and guidelines as well as contractual terms with CMS.

Universal American is a 'chronic poor performer' with respect to the regulations, according to CMS, which said the company's agents engaged in aggressive sales tactics and abusive behavior, and misled or confused beneficiaries or misrepresented the plan.

The agency's letter to Health Net government-programs executive Scott Kelly said the company's conduct 'poses a serious threat to the health and safety of its enrollees,' as a result of the company's 'intractable failure to provide its enrollees with prescription drug benefits in conformance" with laws, guidelines and contract terms.' CMS cited a 'history of non-compliance.'

Then, the state of California fined and ordered restitution from multiple companies, as reported by the San Francisco Chronicle:

State regulators Monday fined seven of California's largest health insurers nearly $5 million for systematically failing to pay doctors and hospitals fairly and on time.

The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the plans were paying on average about 80 percent of the claims correctly, far below the legal threshold of 95 percent.

'Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time,' said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states' health maintenance organizations, or HMOs.

In addition to the fines, the companies must pay the doctors and hospitals restitution that is expected to run into the "tens of millions of dollars," Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.

Failing to pay providers properly makes it tougher for them to survive in the struggling economy, Ehnes said. 'If providers are not paid, patient care and access suffer,' she said.

Regulators fined Anthem Blue Cross and Blue Shield of California $900,000 each. United/PacifiCare was fined $800,000 and Kaiser Foundation Health Plan and Health Net were both hit with fines of $750,000.


The fines for Cigna and Aetna were $450,000 and $300,000, respectively, for a total of $4.85 million.

Please note that some of these companies have become "frequent flyers" on the Health Care Renewal blog.  Anthem Blue Cross in California is a subsidiary of WellPoint. WellPoint, in particular, just appears again and again on Health Care renewal.  A list of all posts about that company is here, and see this post for a list of past ethical and management missteps.  Health Net appeared in both stories above, and appeared on Health Care Renewal here.  Posts on Aetna are here.

Having been writing for this blog now for several years, I am struck by how often the conduct of particular health care organizations has been discredited, without any discernible effect on the organization's leadership or course.  It is particularly striking how the attention paid and pay given to the leaders of some health care organizations contrasts with the public record of their organization's bad behavior.

In particular, contrast the long catalog of misbehavior by WellPoint, noted above, with the enormous earnings of the company's CEO (more than $13 million in 2009), and her status as a prominent speaker on health care policy (see post here). 

In the laissez faire, anything goes, wild, wild west economy of today, spearheaded by the financial service companies that lead us to the global economic collapse, it seems that ethical leadership counts for nothing.  This is bad when it applies to the leadership of financial services, whose bad leadership can cost us all a lot of money.  It is worse when it applies to health care, whose bad leadership can cost us our health and our lives.

As I have said ad infinitum, to really reform health care, we will need to get accountable, ethical, transparent leadership of health care organizations.

Managed Care Executives Will Not Limit Rescissions

We have posted before about how certain health care insurance companies/ managed care organizations in California were found to have cancelled individual health insurance policies after the people holding them made substantial claims, supposedly rationalized by minor errors or omissions in the information the people supplied to the companies on their individual applications found after the claims were made. Several companies were subsequently disciplined by the state government for these "rescissions." See posts on rescissions by WellPoint here, here, and here, and by Health Net here.

Executives of several such companies testified before a US congressional committee recently, with remarkable results, as reported by Lisa Girion writing in the Los Angeles Times. First, by way of background, the article suggested that rescissions are widespread:

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.

Furthermore,

The committee's investigation found that WellPoint's Blue Cross targeted individuals with more than 1,400 conditions, including breast cancer, lymphoma, pregnancy and high blood pressure. And the committee obtained documents that showed Blue Cross supervisors praised employees in performance reviews for rescinding policies.

One employee, for instance, received a perfect 5 for 'exceptional performance' on an evaluation that noted the employee's role in dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.

Nonetheless, the executives were not prepared to abandon rescissions:

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 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.

Sassi said rescissions are necessary to prevent people who lie about preexisting conditions from obtaining coverage and driving up costs for others.

'I want to emphasize that rescission is about stopping fraud and material misrepresentations that contribute to spiraling healthcare costs,' Sassi told the committee.

But rescission victims testified that their policies were canceled for inadvertent omissions or honest mistakes about medical history on their applications. Rescission, they said, was about improving corporate profits rather than rooting out fraud.

Also,

Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show 'intentional fraud.'

The answer from all three executives:

'No.'

This is just amazing. Here are executives of three of the country's largest for-profit health care insurance companies/ managed care organizations asserting they will continue cancelling peoples' policies after they make claims, simply because of minor errors or omissions in the application documents that have no bearing on the particular claims, or on discrepancies between information provided by patients and doctors, given that patients may not have full access to or understanding of what is in their charts. What good is an insurance policy that is liable to be cancelled as soon as one makes a claim on it?

Whatever these companies are selling, it is not insurance. Basing our health care system on their products is foolish, but that is what we are doing, and what many political leaders would continue to do.

In my humble opinion, if we are going to have a system based on privately provided insurance, that insurance has to be honest, unlike what some of our largest insurance companies seem to be peddling.

The Judge Cites Health Net's "Egregious" and "Reprehensible" Business Practices

More than two years ago, we noted that Health Net Inc,, the large US health insurer/ for-profit managed care organization, had settled a class-action lawsuit brought by California physicians under the RICO (Racketeer Influenced and Corrupt Organizations) standard. Late last year, we noted that HealthNet was fined by the state of California for offering bonuses to employees who retroactively cancelled the most individual health policies after their holders got sick and filed claims, and that the company was under investigation in Connecticut for allegedly sending deceptive messages to pharmacists that denied payment for some low-income childrens' medication.

Last week, Florida Health News reported,

Medicare officials have ordered Health Net, Inc., one of the largest publicly traded health insurers in the nation, to stop marketing its “Health Net Orange” prescription drug plans.

The U. S. Centers for Medicare and Medicaid Services also froze enrollment in the drug plans, according to an obscure notice on a government Web site.

The government acted against the California company because it fell behind in processing enrollment applications and sent members incorrect information about changes in their coverage for 2008, said CMS spokeswoman Allison Henry.

Also last week, Lisa Girion wrote in the Los Angeles Times, that Health Net was being sued by the Los Angeles City Attorney for allegedly retroactively canceling individual insurance policies after their holders got sick, and was opening a criminal investigation of allegations that the company paid bonuses to employees who cancelled the largest number of policies.

To top it all off, Lisa Girion also reported in the Los Angeles Times,

One of California's largest for-profit insurers stopped a controversial practice of canceling sick policyholders Friday after a judge ordered Health Net Inc. to pay more than $9 million to a breast cancer patient it dropped in the middle of chemotherapy.

The ruling by a private arbitration judge was the first of its kind and the most powerful rebuke to the state's major insurers whose cancellation practices are under fire from the courts, state regulators and elected officials.

Calling Woodland Hills-based Health Net's actions 'egregious,' Judge Sam Cianchetti, a retired Los Angeles County Superior Court judge, ruled that the company broke state laws and acted in bad faith.

'Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured,' Cianchetti wrote in a 21-page ruling.

When Health Net dropped her in January 2004, Bates was stuck with more than $129,000 in medical bills and was forced to stop chemotherapy for several months until she found a charity to pay for it.

Amazingly enough, Health Net's top leader actually promised to stop retroactive cancellations of individual policies, and expressed what appeared to be remorse for his company's actions.

Health Net Chief Executive Jay Gellert ordered an immediate halt to cancellations and told The Times that the company would be changing its coverage applications and retraining its sales force.

'I felt bad about what happened to her,' he said. 'I feel bad about the whole situation.'

Gellert said he would move quickly to 'give people the confidence that they can count on their policy.' Specifically, he pledged to stop all cancellations until an external review process could be established to approve all cancellations.

Until Friday, the companies had uniformly defended cancellations, saying they were 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.

It is also noteworthy that documents produced during the trial appeard to confirm previous allegations that Health Net paid bonuses to employees who retroactively terminated the most individual policies.

At the arbitration hearing, internal company documents were disclosed showing that Health Net had paid employee bonuses for meeting a cancellation quota and for the amount of money saved.

'It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive,' the judge wrote.

HealthNet has now quite a record of bad behavior, from settling a racketeering-influenced corrupt organization (RICO) lawsuit, being fined for paying bonuses to employees for retroactively canceling individual health policies, being forbidden to market specific policies by the US Center for Medicare and Medicaid Services (CMS) because the company provided policy-holders misleading information, to now being subject to punitive damages for a single, "egregious" retroactive policy cancellation. That's quite a track record. Yet despite this record, so far no individual company leader has had to pay any penalty, and while the company is lead by the same people who were apparently responsible for all these previous messes, the company's business has not suffered.

This illustrates a huge problem with the current way health care operates in the US. There are no major disincentives of any kind for leadership that puts the company's and their "own financial interests" ahead of patients' interests. The leaders do not have to fear for their jobs, reputations, or pocketbooks. After all was said and done, at the most they might have to say "sorry."

Until our system and culture start to provide for major disincentives for unethical business practices by leaders of health care companies, such practices will continue unabated. The results will continue to be "egregious" and "reprehensible."

One wonders with all the hand-wringing about health care going on during the current US presidential campaign, whether anyone will notice that mismanagement and unethical business practices in health care organizations likely account for much of our excess costs, poor access, and degrading quality. Revamping health care financing might change the nature of the mismanagement and unethical business practices that afflict health care, but it won't eliminate them. We will have more cases like that of HealthNet, worse cases than that of HealthNet as long as we ignore these elephants in health care's living room.

ADDENDUM (29 February, 2008) - See also comments on the Effect Measure blog, and The Health Care Blog.