Here is the problem in a nutshell: The Insurance industry claims the right to cancel coverage when they deem the need in a specific case to be too expensive. Who of us can predict that our medical needs will never become expensive? The statement by three top executives in the health insurance industry told us that that is the case. The following is an excerpt from the report of the Hearing Of The Oversight And Investigations Subcommittee Of The House Energy And Commerce Committee – “Terminations Of Individual Health Policies By Insurance Companies.” The hearing took place on 06/16/2009.
REP. STUPAK: Let me ask of our CEOs this question, starting with you Mr. Hamm, would you commit today that your company will never rescind another policy unless there was intentional fraud -- fraudulent misrepresentation in the application?
MR. HAMM: I would not commit to that.
REP. STUPAK: How about you Mr. Collins, would you commit to not to rescind any policy unless there is an intentional fraudulent misrepresentation?
MR. COLLINS: No, sir. We follow the state laws and regulations. And we would not stipulate to that. That's not consistent with each states' laws.
REP. STUPAK: How about you, Mr. Sassi, would you commit that your company will never rescind another policy unless there was an intentional fraud, misrepresentation?
MR. SASSI: No, I can't commit to that. The intentional standard is not the law of the land in the majority of states.
Moreover, it turns out that a substantial number of cases of extreme need have been cancelled. And which ones were canceled? Those with the most need for coverage, of course. A July 27, 2009, publication of the Committee on Energy and Commerce of the United States Congress entitled “Insurance Company CEO Cannot Explain His Company’s Own Application Form” states the following:
“As part of a year-long investigation, the Committee examined more than 116,000 pages of documents showing that these companies retroactively terminated, or “rescinded,” nearly 20,000 policies over the past five years based on omissions in applications that the companies identified only after the policyholders became ill. These rescissions resulted in savings to the companies of more than $300 million.
“The documents revealed numerous cases in which the companies rescinded policies for omissions that were based on health conditions completely unknown to the policyholders, unrelated to the illnesses being treated, unintentional, or caused by others, including the insurance companies’ own agents. The insurance applications were often vague, confusing, and filled with medical jargon that most applicants do not understand.”
I don't know where to go with this, how to awaken a wider sense of alarm about it. As one measure I have written my own insurance agent. Admittedly he has nothing to do with health insurance industry -- and I believe he's an honest guy -- but I want to warn him of the eventual consequences, even for him and for the industry in general, of the policies that those executives have defended before Congress. To spread my concern as widely as possible I attach here a copy of my letter to him.
[Click on the title for a link to Galloway's comment.]
You know that my family does essentially all our insurance contracts with you, so I am writing you to express my concern about the insurance industry.
The behavior of the health industry is seriously damaging the respect that we all have had for the industry. As you know, insurance requires trust. What the health insurance industry executives are now doing has seriously undermined my confidence that any insurance program has my interest at heart. To explain my concern I attach a letter I wrote to my health insurer. I also include here a copy of Joe Galloway's recent article about the industry.
Note that the industry is spending 1.4 million dollars a day to make sure that a national health care program is never established. That money comes from the premiums of those whose contracts they hold. In addition, the executives of these companies are exceedingly well paid -- with, again, the premiums of those who have contracts with them, premiums that were meant to ensure health coverage of families for the time when they have health problems.
What alarms me is the recent declaration of the leaders of the industry that they would not cease to cancel contracts of people whose illnesses become too expensive. This was a way of saying that their first commitment was to their Wall Street investors -- not in those who invest in their insurance contracts in order to have coverage when they need it. The executives are prepared to break a contract with those who are paying them premiums in order to satisfy the interests of the large investors who control stock in their companies.
Even though it is well known that the public favors a national insurance system of some sort, the industry -- they have to be the ones behind this -- has allowed the public to believe that a government insurance program would constitute a socialist take over, would foster euthanasia, would take away extant insurance contracts, etc. This is the kind of misinformation that was used against the Medicare Bill. Of course now there is virtually no interest in abandoning Medicare.
My understanding of insurance is that it is meant to be a common pool into which everyone pays so that those who have exigencies can be provided for when critical needs arise. This is not what the industry is now doing: It is now merely an investment tool by which to make money for those who hold stock, and by implication those who hold the most stock in the company. This is a contradiction in the concept of providing protection for the health needs of the public. Is the industry there to provide for the needs of those who pay premiums, or for the interests of those who demand ever higher profits?
I realize you can do little about it, perhaps not much more than I can. But I'm writing to you to encourage you to pass the word up the line that these executives have seriously undermined the appearance of integrity that your industry must have in order to prosper. They are about to make themselves as disreputable as the tobacco company executives. You have a stake in this because your prosperity demands that you successfully reassure your clients that you are watching out for their welfare, not the welfare of the investors in your industry.
The collapse of confidence in your profession may not take place in a day, and in fact there is a good chance that the activities of the health insurance companies will win this time. But as it was for the tobacco industry, confidence and respect will erode. Eventually you and the industry will pay a price. And because you have a small company you might end up paying a very big price -- in the costs of your personal health care and costs of health care for your company.
I invite you to read the recent statement by Galloway and to see the letter I sent to my own health insurance agency.
Best, Bob Canfield