Biotech Values

[Biowatch]

Think you're insured? Maybe not

Why do insurance companies play rough with legitimate claims? And, more important, what can you do if it happens to you?

http://money.cnn.com/2007/02/12/magazines/moneymag/insurance.moneymag/index.htm?postversion=20070213...

By Walter Updegrave and Kate Ashford, Money Magazine
February 13 2007: 2:17 PM EST

(Money Magazine) -- When Jacqueline Epcar of Valley Glen, Calif. turned 19 last year, she no longer qualified for coverage on her parents' health plan. So her mother, Ellyn, signed her up for a new individual policy with Blue Shield of California.

The insurer cashed the Epcars' check, and their broker gave Ellyn a policy number and told her coverage would start July 1.

Shortly after, Jacqueline went to the doctor with a sore throat - she'd been getting them for months. The doctor in turn sent her to a specialist, who ordered a white-blood-cell scan. The scan indicated an auto-immune disease.

That's when Blue Shield decided that it hadn't really meant to cover Jacqueline after all.

The insurer sent a letter explaining she was not eligible for a policy because she had, among other conditions, inflammatory acne. But she didn't. So the Epcars refuted the information.

Blue Shield then sent a new rejection letter saying Jacqueline's policy hadn't been in effect when she was diagnosed, and it wouldn't cover someone with an auto-immune disease - even though it had already taken Ellyn's money and given Jacqueline a policy number.

The rejection left the Epcars with $8,000 in medical bills, an uninsured daughter (later diagnosed with lupus) and bitter feelings toward their insurer.

"They just didn't want to cover somebody who had a problem," says Ellyn. (Luckily, the family did find other coverage. Blue Shield declined to comment.)

Most of the time, when insurers don't pay, the reason is obvious.

Maybe you missed a premium payment or forgot to mention last year's quadruple-bypass surgery on your application. Or maybe your policy's fine print excludes the kind of damage you incurred.

But sometimes, as in the Epcars' case, an insurer's reason for not paying is...well, hard to fathom.

Are insurers more hard-nosed with claims than they used to be?

Since the industry is regulated by the states, there are no national data to draw on. But the scattered state-level evidence suggests that insurers may be taking a harder line.

In Michigan, for instance, complaints against insurers are up 16 percent over 2001, while in Connecticut, justified complaints against health insurers (those considered to have validity by regulators) have risen more than 60 percent since 2000.

Enforcement action is up too: In Texas last year the number of cases against insurers increased 21 percent compared with 1999.

Current headlines, meanwhile, leave a strong impression.

For starters, there's the ongoing Hurricane Katrina saga, in which companies like Nationwide, State Farm and USAA debate thousands of plaintiffs on such existential issues as whether the damage to the Gulf Coast was due to flooding, which typically isn't covered, or wind, which is.

In California, meanwhile, Blue Cross recently settled more than 60 cases in which policyholders claimed their coverage had been unfairly voided, and regulators slapped both Blue Cross and Kaiser Foundation Health Plan with six-figure fines for wrongful rescissions. (The carriers say they're working with state regulators to improve their practices.)

Against this contentious backdrop, it's ironic that insurers are thriving. Big public health carriers have been posting 20 percent-plus gains in earnings, and property/casualty companies (which cover, for example, autos and homes) are more profitable than ever.

Or maybe it's not so ironic.

A study this January by Robert Hunter, a former insurance commissioner of Texas, now the insurance director of the Consumer Federation of America, shows that property/casualty insurers are paying out less in claims relative to the premiums they collect than at any time in the past 20 years.

That's partly due to smart underwriting and higher premiums, which have jumped 100 percent or more in some coastal markets over the past few years. But lower claims payouts also play a role.

Hunter, along with a chorus of consumer advocates, attributes some of that to increasingly aggressive claims management across the industry. More bare knuckles in the claims department, more battles with consumers.

Next page: Hardball with homeowners
[cut for brevity]

You're covered...then you're not

Waiting for an overdue reimbursement check is a hassle. Finding that your health insurance has been nullified after you've incurred serious medical costs can be an outright catastrophe.

Called "rescissions," such ex-post policy denials are rare - insurers say they affect only about 1 percent of individual policyholders (they don't occur in employer-sponsored group plans) - but the practice appears to be growing.

Last year, for example, California regulators launched investigations into the rescission practices of Blue Shield, Health Net, PacifiCare and other providers. Meanwhile, the Connecticut Department of Insurance is also investigating Assurant Health after 15 of 20 complaints to the state attorney general involved its use of retroactive denials of coverage. (Assurant asserts that it enacts rescissions only when policyholders don't provide truthful or complete information during enrollment.)

Rescission is, in effect, the neutron bomb of health insurance. If you're hit by one, you're not only left without insurance to cover the illness at hand, but you're also liable for your previously paid claims.

In some states, insurers can't void your policy unless they can show you meant to deceive them; in others, including Michigan and Ohio, they can drop the bomb over any inaccuracy, even an innocent mistake.

"This is a very serious concern," says Cindy Ehnes, director of California's Department of Managed Health Care. "The consequences of failing to list something as simple as headaches can be profound."

Consider Barbara and Don Saxby of San Rafael, Calif., a self-employed couple who applied for an individual health insurance policy with Nationwide in January 2006.

When Barbara showed the application she'd submitted to Don, he pointed out a couple of gaps in his medical history. Barbara called Nationwide to correct the application, but was told not to worry, the insurer would catch omissions during underwriting.

Shortly after the policy went into effect, Don, 41, tore most of the ligaments in his left knee in a skiing accident. The ensuing surgery was unusually expensive, partly due to a condition in which Don's blood doesn't clot normally. (The blood condition was on record with his doctors, who didn't consider it a problem. Nor had it stopped Don from qualifying for insurance in the past.)

In December, Nationwide sent a letter rescinding Don's policy due to a "misrepresentation" on the application. The Saxbys now find themselves saddled with more than $400,000 in medical bills and are pursuing litigation against Nationwide. "This just isn't right," says Barbara. "They don't even bother to do due diligence." (Nationwide declined to comment on the case.)

For many applicants, the trouble starts when they sign a medical release giving insurers access to their medical records. Don't assume the insurer is going to examine those records before okaying coverage.

It may not follow through, says Paul Roller, a former insurance commissioner of Alaska who's now a plaintiffs lawyer in California. "The company takes the position, 'We have a clean application so there's no need to get records,' " he says. "The insurer, in effect, says, 'If I know about a condition and you get sick, I'll have to pay. So don't tell me.'"

The period of convenient ignorance ends, of course, as soon as you file a claim. Many insurers use software that singles out claims for review by diagnostic code. The review then determines if you may have had a pre-existing condition or left anything off the initial application.

While insurers need to protect themselves from people who misrepresent their health status to get coverage, the potential for abuse is obvious: An insurer looking to lower risk can use the review to find any excuse not to pay an expensive claim.

Says Connecticut Attorney General Richard Blumenthal: "There is powerful evidence that 'look back' provisions are used systematically to exclude people with valid claims simply because those claims are expensive."

So what should you do if your health policy is rescinded? File an appeal with your insurer right away. And if the company sends you a check refunding your premiums, don't cash it.

That can be taken as tacit agreement, says Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego.

If you lose the appeal, file a complaint with your state. If all else fails, consider hiring an attorney.

Meanwhile, shop for a new policy. If you live in a state like Massachusetts, where insurers are required to offer you coverage, you'll likely pay more, but at least you'll be insured.

In states like California, which allows insurers to refuse to sell a policy to anyone with a previous medical condition, you may be relegated to your state's high-risk insurance pool.

Obviously it's better to try to avoid rescission from the get-go. When filling out an application for a policy, err on the side of telling too much, noting any condition you've ever been seen or treated for.

And if you've been with a health plan for two years or more, be cautious about switching carriers. Rescissions are typically allowed only within the first two years of a policy.

Liang, for one, sees practices like rescission and lowballing as a sign that insurers - property and casualty companies as well as health carriers - sometimes forget the business they're in: buying risk.

"Risk means you win some, you lose some - you can't eliminate it," he says. "That's not what insurance is about."

The best insurers know that. But to assume yours is one of them may be taking on more risk than you should.

You can improve the odds that you'll collect the policy benefits you expected, if and when you need them, if you take these steps.

Preventive measures

Keep good records. Create an inventory of your possessions to make it easier to document any losses. You can download a home inventory form at the Policyholders of America Web site (Policyholdersofamerica.org) or create your own video inventory by walking through your home, recording each item and narrating pertinent details, such as the cost.

Keep records of remodeling jobs as well as building plans that attest to your home's size and type of construction. Store copies of these records in a repository outside your home (like a safe-deposit box) so they're not lost in a fire or other disaster.

Be frank: If you're applying for an individual health insurance policy, err on the side of providing more info. Spell out any condition for which you've seen a doctor or been treated. If you need more space, attach an explanation.

"Writing a letter about the knee problem that went away five years ago is appropriate," says Maureen Smith, director of consumer relations for Connecticut's Office of the Health Care Advocate.

If the application has only four or five broad questions, offers instant approval or asks for your lifetime medical history (instead of a specific period like 10 years), consider going with a different company.

Read the fine print: Renewing your homeowners policy or buying a new one? Make sure the policy doesn't include special deductibles for wind damage, onerous limits on replacement costs or other expensive restrictions on coverage, advises Robert Hunter, director of insurance for the Consumer Federation of America.

Switching employer health plans or buying an individual policy? Read the plan documents carefully, noting the policy's exclusions and limitations, as well as its appeals process (including deadlines). If the plan won't cover treatment you're likely to need, better to know that up front.

Be a boy (or girl) scout: Before you go in for an expensive health procedure, call your insurer to make sure that it's covered. Get preapprovals and referrals, as required.

Document your calls (jot down the name of the representative, date and time) and keep copies of referrals and other relevant paperwork.

Making your claim

Do your homework: Don't automatically accept an insurer's damage estimate; instead, document the claim yourself.

If, say, a storm has seriously damaged your home, get bids from three qualified local contractors and have them spell out exactly what repairs are needed and what that will cost.

If the insurer's estimate comes in appreciably lower than your own, the estimates will provide you with evidence to help make the case for a higher payout.

Keep your cool: Getting angry with an adjuster or other insurance rep rarely helps your case and could hurt it.

"It might make you feel better, but if you get angry, more than likely your file is going to the bottom of the pile," says Susan Dressler, owner of Health Claim Assistance, who spent 17 years working in the claims department of several insurers.

Instead, get the name and phone extension of anyone helping with your claim and make him your ally.

Don't take no for an answer: If you're turned down for a higher payout or your claim is denied altogether, appeal. Relatively few policyholders challenge coverage decisions, but those who do are often successful. Studies show that nearly half of appeals are decided in favor of the consumer.

Get help: Still can't get any satisfaction? Ask your state regulator and department of insurance for help. Bear in mind, though, that insurance commissioners in some states are decidedly more useful than in others.

Find other state health-care advocates at familiesusa.org (click on Consumer Assistance Program Locator). For problems with health coverage, a claims assistance professional can also fight on your behalf (find one at claims.org). Fees range from $30 to $160 an hour.

Weigh your last resorts: So you've exhausted your appeals to no avail. What to do? Sure, you could hire a lawyer and sue. But because of the cost involved, a lawsuit usually doesn't make sense unless you have a very large claim or the insurer's actions are so egregious you might get punitive damages. Lawsuits can also drag out for years.

A better bet for homeowner claims: Invoke the appraisal clause that's part of most policies, allowing you and the insurer to both hire appraisers who try to agree on a binding settlement. If they can't come to terms, an umpire chosen by the appraisers or a judge will arrive at a figure.

Where to go for help

Preparing to file a claim? Concerned you're not getting the full benefit you're owed? Check out these online tools and tips.

Families USA (familiesusa.org): Find state agencies that help with health insurance issues.
http://familiesusa.org/

Georgetown University Health Policy Institute (healthinsuranceinfo.net): Go here for state-by-state guides that spell out your rights as a policyholder.
http://healthinsuranceinfo.net/

National Association of Insurance Commissioners (naic.org): Get direct links to state insurance departments.
http://naic.org/

Policyholders of America (policyholdersofamerica.org): Download home inventory forms and get help crafting effective complaint letters.
http://policyholdersofamerica.org/

United Policyholders (unitedpolicyholders.org): Go to Claims Tips for advice about the best techniques for filing claims and resolving disputes quickly and fairly.
http://unitedpolicyholders.org/