California AG to Investigate Insurers for Rationing & Refusing Care

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10 September 2009 :: staff

A report by the California Nurses Association has found that between 2002 and June 2009, six of the largest private insurers in the state of California rejected fully 22% of all claims filed by doctors and hospitals during that time. The findings demonstrate a systematic and ongoing effort by private insurance companies to ration and deny medical care to patients whose treatment is supposed to be paid through their policies with those companies.

According to the report:

Six of the state’s largest insurers rejected 45.7 million claims for medical care, or 22% of all claims, from 2002 to June 30, 2009, according to the California Nurses Assn.’s analysis of data submitted to regulators by the companies.

The rejection rates ranged from a high of 39.6% for PacifiCare to 6.5% for Aetna for the first half of 2009. Cigna denied 33%, and Health Net 30%.

While insurers say the report is unfair, because some of their denials are legally justifiable and some that are initially imposed for “technical” reasons are later paid. But there are numerous accounts of insurers refusing payment for treatments that are then not administered, and the eventual approval coming too late to treat a deteriorating condition.

An example is the case of Hilda Sarkisyan, whose daughter Nataline died while waiting for a liver transplant that would have saved her life. CIGNA had refused to fund the treatment, alleging it was an illegitimate claim, but eventually reversed its decision under severe public pressure. By then, it was too late, and Nataline died without receiving a transplant.

CIGNA’s spokesman at the time, Wendell Potter, said he and many of his colleagues were deeply saddened by the company’s choice and that disappointment over such policies eventually motivated him to leave CIGNA. He told Democracy Now in July:

Even though I was having to represent the company, and again was being as truthful as I could, I all the time was just thinking about the family and the grief that they were going through and the way their—you know, they were briefly optimistic that the decision to cover the procedure might save her life, and then so quickly for that hope to be dashed was just devastating for them, I know, and it was just crushing for me and a lot of people that I worked with at CIGNA, too. I want to make sure that that’s understood, that it, you know—I was so disappointed, and I was hopeful, too, that this might be something that actually would save her life. It was just a dreadful, dreadful experience for everyone concerned; there were no winners in that at all.

California’s attorney general, Jerry Brown, said in response to the California Nurses Association’s findings that “These high denial rates suggest a system that is dysfunctional, and the public is entitled to know whether wrongful business practices are involved”. Hilda Sarkisyan has become a leading advocate of comprehensive health insurance reform, including a ban on any denial of treatment for pre-existing conditions.

Hilda Sarkisyan said of her daughter Nataline’s tragic death:

Well, we miss her. We don’t have our beautiful daughter with us anymore. And CIGNA is doing this every day, every day. And that’s why I’m out there to help other families to stop them. It’s not only CIGNA; it’s all the insurance industry, that they are placing profit before patient, and it’s not right. And they are enforcing the care of people, not their—you know, they should not enforce the care of the people to their deep pockets. It’s all about their pocket, all about the CEO, how much he makes. I miss my daughter. I had a beautiful, perfect daughter. I don’t have her anymore. I don’t.

Numerous analysts, including industry whistleblowers like Wendell Potter, have said the industry is not only incentivized to deny treatment and undercut payments for legitimate claims, but is greatly rewarded for doing so, by investors and Wall Street profit-projection and stock-value analysts. Pres. Obama noted this very distortion of priorities last night in his address.

But the most worrying aspect of Sarkisyan’s comments is the warning that such firms are “doing this every day, every day”. The report from the California Nurses Association demonstrates that over the course of just seven years, a total of 45.7 million health treatments were refused by just six insurance companies in just one state.

Those are 45.7 million cases of potentially high-risk refusal of treatment —read: deliberate and systematic rationing of care— to patients with fully paid health insurance policies that are supposed to provide for needed medical treatment, and whose costs during that time increased by many times the rate of general inflation across the economy.

PacificCare (a subsidiary of United Healthcare) and CIGNA had the highest rates of refusal of treatment, at 39.6% and 32.7% respectively. Close behind, and also at rates significantly above refusal of 1 in 4 treatment requests, Healthnet refused 30%, Kaiser Permanente refused 28.3% and Blue Cross refused 27.9% of all claims.

The major insurers were found to have judged all payment for treatment as part of a “medical loss ratio”, designed to help them reduce treatment reimbursement and maximize profits. Over the same period, some premium costs increased by as much as 40%, rates which critics, and now state regulators, say have never been adequately justified.

A possible explanation for the radical shift in the manner in which money paid into insurance policies is being spent comes from industry insiders themselves. Wendell Potter, the same whistleblower who left CIGNA due to his disapproval of their refusal of care practices, has said of major private insurers:

They have begun shifting their business model away from managed care, which, frankly, I used to think was a great model, a great concept, for the delivery of healthcare. But they’ve moved—they’re moving away from that to what they refer to as consumer-driven or consumer-directed care, and it really is just a euphemism for shifting the financial burden from insurers and employers onto the shoulders of working men and women. I saw that happening. But I also saw how—you know, the things that they do to maximize their profit, which really boils down to dumping the sick.

The practice of dumping the sick in order to maximize profits by taking money from the healthy and refusing to treat the sick is often carried out by using claims of pre-existing health conditions, which the firms allege are to blame for patients’ eventual contraction of a more serious, and expensive condition. Sometimes undiagnosed conditions or conditions as trivial as acne are used as excuses to refuse treatment for cancer and other life-threatening conditions.

In order to explain how insurance companies strip away the human need of patients —who are paying clients with legal rights—, Wendell Potter spoke of seeing the effects of the routine practice of systematic denial of care first hand, when he attended a free healthcare “expedition” to rural Virginia:

It was raining that day. They were lined up in the rain by the hundreds, waiting to get care that was being donated by doctors and nurses and dentists and other caregivers, and they were being treated in animal stalls. Volunteers had come to disinfect the animal stalls. They also had set up tents. It looked like a MASH unit. It looked like this could have been something that was happening in a war-torn country, and war refugees were there to get their care. It was just unbelievable, and it just drove it home to me, maybe for the first time, that we were talking about real human beings and not just numbers.

The California investigation could lead to important new data about how insurers handle the money paid into their funds by policy-holders, how much of it is devoted to profit how quickly, and whether enough is even kept on hand to pay legitimate health treatment costs. It could also potentially lead to the prosecution of individuals or firms that broke the law in a way that caused patient death.