In the world of health care, things are not always as they seem.
Take, for example, this month’s announcement by the Schwarzenegger administration ofs settlements between the state and two health insurance companies that the governor said will allow hundreds of patients whose policies were rescinded to buy insurance again.
The announcement garnered positive headlines for the administration, but critics say the agreements do little to help those who had their health insurance unilaterally cancelled by HMOs. Consumer advocates claim the proposal lets health plans off the hook, paying just pennies on the dollar of these patients’ health care bills — even if the patients’ health insurance was eliminated illegally. “The state says it will cover $15,000 [in patients’ health care costs]. I’ve never yet seen a rescission case that was as low as $15,000 in medical bills,” said Jerry Flanagan, a health care activist for Consumer Watchdog. “Most of them are $100,000 or $200,000 or more.”
Under the state-brokered settlements, 1,092 Kaiser Permanente patients and 85 HealthNet patients will be contacted one-by-one and offered a chance to buy new coverage, regardless of prior medical history. The Department of Managed Health Care was unable to provide total numbers of how many customers have had their insurance rescinded by health plans.
“In addition to regaining health coverage, consumers would be eligible to go through an independent arbitration process to resolve claims-payment issues which may have occurred during the period of non-coverage,” the DMHC said. The canceled patients can recoup up to $15,000 in medical expenses, under the agreement. A $300,000 fine also was levied against Kaiser, a fine that could climb to $3 million if it fails to comply with the terms of the settlement.
“We are voluntarily taking this step today because it is in the best interest of our members,” said Kaiser vice president Jerry Fleming. “We performed policy rescissions for a little over two years, and we stopped in October of 2006. We are now offering these rescinded members a fresh start with coverage going forward and a process to resolve any disputes.”
But attorney William Shernoff, who represented some 6,000 policyholders in a class-action against Blue Cross for rescinding policyholders, says the department did not go far enough.
“Kaiser stopped the rescissions in 2006. Why isn’t the state stopping all the rescissions? They are going on right now, and the state is doing nothing,” Shernoff said. “It’s an illegal system that actually hurts people, and some people actually die.”
This week, the state Assembly passed two key bills dealing with rescission. AB 1945 by Assemblyman Hector De La Torre, D-South Gate, would require health plans to seek approval from an independent agencies before a patient’s coverage can be rescinded. And AB 2549 by Assemblywoman Mary Hayashi, D-Castro Valley, would not allow a health plan to rescind anyone’s coverage after they have had insurance for six months.
All of the patients who were offered reinstatement last week had their coverage rescinded during a four-year period starting in 2004, with most of those rescissions occurring before 2006. It was unclear how many of these 1,092 may have already obtained other health care coverage in the years since their policies were cancelled.
None of the parties to the settlements acknowledged any wrongdoing in connection with the patients’ loss of coverage.
Earlier this year, the department has ordered the reinstatement of 26 patients whose health care coverage was cancelled, but DMHC Director Cindy Ehnes said she expected more reinstatements to follow.
In those cases, Ehnes said, the department ordered the health plans to pay all of the health care costs incurred by the patients. In this settlement, DMHC is only asking the plans to pay $15,000 of those costs.
Last week’s announcement was notable for what it did not include – there was no mention of the biggest player in the individual health care market, Blue Cross. Blue Cross controls an overwhelming share of the market, and has come under scrutiny by the department for its rescission practices.
An earlier review of a sampling of 90 patients who had their coverage rescinded by Blue Cross found that all 90 of those rescissions were illegal.
Of the 1,092 Kaiser Permanente patients and the 85 HealthNet patients covered by the agreements, it was not known how many, if any, had been illegally rescinded or how many applicants deliberately lied on their original applications for coverage.
“Let’s just say as to those 1,092 (Kaiser) customers, that a certain portion of them would have been determined to be unfairly or illegally rescinded, but there was another percentage that the health plan would have been able to sustain its burden of proof,” said Cindy Ehnes, director of the DMHC.
The fact that the patients have a chance to get new coverage was lauded by even the sharpest critics of the administration regulatory role over the HMOs.
But there was concern over the wording of the settlements, which appear to hamstring efforts by angry patients to go to court. A principal goal of the settlements is to prevent lawsuits against either the HMOs or the state.
Flanagan said the agreements are written in such a way as to protect the HMOs—and the state—from lawsuits, but that the ill patients were lost in the shuffle.
“It is very inappropriate for a regulator to be inserting themselves into the courtroom. What’s really going on, is that the regulator is giving the insurance company a get-out-of-jail free card in case of a future class action,” he said, adding that the state should have ordered blanket reinstatements rather than broker settlements.
But Ehnes said her department lacked the legal authority to order blanket reinstatements, and that the state could have been held legally liable if it had issued such an order.
“Under the statute, I don’t have the authority to order blanket reinstatements. Any order I issue is subject to a challenge by the health plan under the Administrative Procedures Act,” she said. “And enrollees are still not covered while I am litigating.”
The settlements, she added, ensure the patients have an opportunity to get coverage “without compromising their legal rights to any damages.”