paying $130,000 in medical bills.
Girion wrote later that when her story appeared, in March 2006, “my in-basket overflowed with emails from readers telling me the same thing had happened to them or someone they knew. They all said their insurers had accused them of lying on their applications after they incurred significant medical bills.” Her stories on the practice prompted state insurance regulators and a congressional panel to launch investigations. They discovered that insurers scour the medical records of policyholders who start filing expensive claims, looking for reasons to cancel their policies.
The congressional investigation into the rescission practices of just three insurers revealed that they had canceled nearly twenty thousand policies retroactively over a five-year period after going back to look at the original applications of policyholders who were undergoing expensive care. Rescinding those policies enabled the companies to avoid paying three hundred million dollars in claims. If the investigation had been broadened to include more insurers and had covered a longer period of time, Congress undoubtedly would have discovered that the practice is far more widespread.
In May 2010, Reuters reported that WellPoint, the parent company of Anthem Blue Cross, “singled out women with breast cancer for aggressive investigation with the intent of cancelling their insurance.” WellPoint acknowledged that it had rescinded a number of breast cancer patients’ policies but denied that the women had been singled out. Reuters stood by its story. It noted that WellPoint was one of the three companies investigated by Congress (UnitedHealth Group and Assurant Health were the others) and that the investigation had revealed that WellPoint alone had profited by more than $128 million from canceling policies retroactively, a figure that investigators believed “might be largely understated because the company refused to provide information about cancellations by several subsidiaries.”
When members of Congress asked executives of the three companies if they would end the practice of rescission, they said they would not. That’s because dumping even a small number of enrollees can have a big, positive effect on the bottom line. (It literally took an act of Congress to force the companies to change their policies. It will become illegal under the Patient Protection and Affordable Care Act of 2010, except in cases involving intentional fraud.)
As I mentioned previously, another way insurers get rid of enrollees they no longer want is to dump small businesses when some of their employees’ medical claims turn out to be greater than the insurance companies’ underwriters expected.
All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether—leaving workers uninsured. This is the practice known in the industry as purging. The purging of less profitable accounts through intentional rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent in 1993 to 38 percent in 2009, according to the National Small Business Association. 5
CIGNA got some very unwelcome publicity a few years ago when it tried to impose such a hefty rate increase on one customer, the Entertainment Industry Group Insurance Trust, that some family-plan premiums would have exceeded forty-four thousand dollars a year.
Jacking rates up so high that customers don’t renew their policies is common. Aetna was so aggressive in getting rid of accounts it no longer wanted after a string of acquisitions in the 1990s that it shed eight million enrollees over the course of a few years. The Wall Street Journal reported in 2004 that Aetna had spent more than twenty million dollars to install new technology that
Girion wrote later that when her story appeared, in March 2006, “my in-basket overflowed with emails from readers telling me the same thing had happened to them or someone they knew. They all said their insurers had accused them of lying on their applications after they incurred significant medical bills.” Her stories on the practice prompted state insurance regulators and a congressional panel to launch investigations. They discovered that insurers scour the medical records of policyholders who start filing expensive claims, looking for reasons to cancel their policies.
The congressional investigation into the rescission practices of just three insurers revealed that they had canceled nearly twenty thousand policies retroactively over a five-year period after going back to look at the original applications of policyholders who were undergoing expensive care. Rescinding those policies enabled the companies to avoid paying three hundred million dollars in claims. If the investigation had been broadened to include more insurers and had covered a longer period of time, Congress undoubtedly would have discovered that the practice is far more widespread.
In May 2010, Reuters reported that WellPoint, the parent company of Anthem Blue Cross, “singled out women with breast cancer for aggressive investigation with the intent of cancelling their insurance.” WellPoint acknowledged that it had rescinded a number of breast cancer patients’ policies but denied that the women had been singled out. Reuters stood by its story. It noted that WellPoint was one of the three companies investigated by Congress (UnitedHealth Group and Assurant Health were the others) and that the investigation had revealed that WellPoint alone had profited by more than $128 million from canceling policies retroactively, a figure that investigators believed “might be largely understated because the company refused to provide information about cancellations by several subsidiaries.”
When members of Congress asked executives of the three companies if they would end the practice of rescission, they said they would not. That’s because dumping even a small number of enrollees can have a big, positive effect on the bottom line. (It literally took an act of Congress to force the companies to change their policies. It will become illegal under the Patient Protection and Affordable Care Act of 2010, except in cases involving intentional fraud.)
As I mentioned previously, another way insurers get rid of enrollees they no longer want is to dump small businesses when some of their employees’ medical claims turn out to be greater than the insurance companies’ underwriters expected.
All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether—leaving workers uninsured. This is the practice known in the industry as purging. The purging of less profitable accounts through intentional rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent in 1993 to 38 percent in 2009, according to the National Small Business Association. 5
CIGNA got some very unwelcome publicity a few years ago when it tried to impose such a hefty rate increase on one customer, the Entertainment Industry Group Insurance Trust, that some family-plan premiums would have exceeded forty-four thousand dollars a year.
Jacking rates up so high that customers don’t renew their policies is common. Aetna was so aggressive in getting rid of accounts it no longer wanted after a string of acquisitions in the 1990s that it shed eight million enrollees over the course of a few years. The Wall Street Journal reported in 2004 that Aetna had spent more than twenty million dollars to install new technology that
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