Like a man stumbling through a darkened room full of sharp objects, the individual health insurance industry continues to bash itself bloody.
Today’s painful encounter is the news that individual health policy marketer HealthMarkets agreed to pay a $20 million fine to 36 states for failing to educate sales reps, failing to fully inform customers, and allegedly not paying providers promptly. HealthMarkets caved quickly, as the agreement came less than a year after the initial suit was filed.
This isn’t the first time HealthMarkets has felt the wrath of regulators.
- In 2006, Massachusetts required HM “reassess denials of policyholders’ medical bills dating to January 2002” (Appleby USAToday)
- Maine levied a million dollar penalty earlier this year, while also requiring HM to refund $5.6 million to policyholders
- Delaware fined HM $500k in 2006 (the largest fine in the state’s history) for “steering consumers into individual rather than group health insurance policies, failing to provide state-required coverages, engaging in deceptive and improper marketing, mishandling consumer complaints and failing to institute adequate management controls” (Commissioner’s statement); the insurer also failed to cover immunizations and mental health benefits, in direct violation of state and Federal law.
The Delaware case is especially revealing. There are better benefits, more state controls, and more regulation of small employer policies. And insurers are required by state law to offer those policies – but HealthMarkets’ subsidiary insurer didn’t, instead steering applicants to the ‘more costly, less benefits, more complicated’ individual policies.
HealthMarkets’ leadership team should know better. Led by Allen Wise (ex-founder of Coventry), the board includes Steve Shulman (ex-Value Health CEO), Harve DeMovick (ex Coventry CIO), the board also is populated with notables from the various investment firms that bought HM several years ago. Fortunately, HM brought a seasoned compliance officer on board earlier this year, but you’ve got to wonder why it took them so long. Wise et al have been in the business for many years, the company had a checkered past (to be kind), and the pressure from regulators didn’t start last year.
Why am I highlighting a relatively small player (>700,000 insureds) that operates on the fringes of the insurance market?
To show what can happen when the insurance business operates in the ‘free market’. This company took advantage of uneducated consumers, sold them policies that weren’t as advertised, took their money and left them with lousy coverage. For all those staunch advocates of deregulation – here’s what you can look forward to – but on a much grander scale.
What does this mean for you?
Most insurance companies aren’t like this. Most are staffed by good people trying to do the right thing, to get policies issues, pay claims fairly and promptly, and operate ethically. But when companies cheat and lie and steal, they make it all too easy for folks to tar all insurers with the same brush.
Joe – I don’t think the issue is one of a free market vs. say, total government control of health insurance (single payer). Rather, it’s one of adequate regulation vs. inadequate regulation.
In the capital markets, there are lots of regulations that govern what companies must disclose when they are selling new stock or debt securities to investors and accounting rules for financial disclosure. In the real estate market, while the rules vary by state, there are regulations that cover what a seller must disclose about known defects in the property and extensive disclosure requirements related to the sale of condos.
With respect to health insurance, there are 12 different versions of Medigap policies, designated by letters A through L. The benefits of an “A” policy are the same regardless of which company is selling it, and companies compete based on service and price. Health insurers should be subject to regulations that require plain English language, standardized benefit packages, with variances for deductibles, co-pays and out of pocket maximums, and an effective and streamlined mechanism for resolving disputes. It shouldn’t be that hard.
Barry – I’m not suggesting it is a free market v single payer. I’m attempting to point out that insurance companies that act like HealthMarkets (or Wellpoint or HealthNet re rescissions) are damaging the industry, and if they continue to do so the single payer advocates will have plenty of ammunition to support their cause. The point also is that regardless of the requirements e.g. Medigap, companies like HealthMarkets have shown their willingness to break the law.