Get Sick. See Health Insurance Vanish. Watch States Fail to Curb Insurance Company Practice.

Parvin Mottaghi's health insurance company cancelled her policy leaving her with about $100,000 in medical bills. Her experience [1] was outlined in a lawsuit against the insurer:

Parvin Mottaghi completed the Blue Shield application on Sept. 14, 2005. In her application she disclosed that she had respiratory problems, specifically bronchitis. Blue Shield approved coverage on Oct. 1, 2004. On Feb. 24, 2005, Parvin went to the Center for Interventional Cardiology and Nephrology for a nuclear cardiology study. Blue Shield approved the exam. After numerous tests, Parvin's doctors determined that she needed open heart surgery for a defective heart valve. Blue Shield authorized the surgery, which was performed on Sept. 1, 2005. Blue Shield cancelled (rescinded) her coverage on March 21, 2006, leaving Parvin with about $100,000 in medical bills.

Her story is not unique. According to the Los Angeles Times [2], California's Health Net "avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006." This dirty secret came out when a hairdresser fought back after Health Net dropped her during her chemotherapy. Then California started investigating the state's top health plans—finding that Health Net is not the only one ripping up people's policies.

The practice is so widespread, Anthem Blue Cross (then Blue Cross of California) even asked doctors to help them cancel patients' coverage. After doctors protested, creating a public uproar [3], the company stopped sending out the letters.

This abuse is certainly not limited to California [4]:

A Logan, Utah couple, Keith and Heidi Bleazard, sought individual coverage in February 2005 and filled out the needed applications with the help of friends who were health insurance agents and a nurse who came out to complete more detailed paperwork. Keith Bleazard's application referenced a slipped disc followed by surgery in 1996 and a full recovery. He had no trouble for three years after the surgery, then pulled a muscle in his back playing basketball and saw a doctor who prescribed medicine for the pain. After that, he resumed routine, rigorous physical activity.

In August of 2005, Heidi Bleazard said she suffered a mountain bike accident in which she fractured her neck, sustained a brain injury, and broke three ribs. "Several hours of neurosurgery were performed to save my spine." Her medical bills topped $100,000.

When the bills reached a peak, the couple's insurer, Regence Blue Cross Blue Shield of Utah informed the Bleazards that it would review their medical records. "Then, in a letter dated Jan. 17, 2006, Regence notified Keith and I that they were rescinding our health insurance policy retroactively. They claimed that Keith failed to provide information in the application about his medical history relating to his back. Regence did not respond to our attempts to talk with them to find out where the misunderstanding came from.

In fact, ABC News reports [5] that:

"According to the insurance industry's own estimate, thousands of similar rescission investigations into policy holders occur every year, and most of them lose all their coverage as a result... 'These incidents are hardly isolated and random—they are part of a pattern, a prevalent practice in this industry that very simply has to be stopped,' Connecticut Attorney General Richard Blumenthal said." [Emphasis added]

Now, the state of California has unveiled new rules [6] that will attempt to prevent insurers from wrongly rescinding policies:

"California Insurance Commissioner Steve Poizner plans to unveil proposed regulations today to combat the health insurance industry practice of dropping members with costly illnesses.

"Poizner's draft regulations would require insurers to write applications for coverage in plain English and allow applicants a "not sure" answer to questions about their preexisting medical conditions. In addition, they would bar insurers from dropping someone if the companies failed to thoroughly investigate an applicant's medical history before issuing a policy.

"Even if an insurer did all that, the rules would bar a cancellation if the patient was unaware of the medical information being sought on the application or failed to appreciate its significance.

"It is the latest effort to curb rescission, an industry-wide practice that has deprived thousands of Californians of healthcare coverage when they were sick, left many with crushing medical bills and saddled physicians and hospitals with uncollectible debt.

"The once-hidden practice has drawn scrutiny since it was exposed in a series of Times articles over the last three years." [Emphasis added]

But can even a large state like California control the health insurance industry? It seems doubtful, given that California regulators have been too afraid to try to collect a $1 million fine [7] against an insurer! They can set all the rules they want, but if states cannot enforce substantial fines against large insurers, they are little more than permissive parents who wag their finger and then let their misbehaving children go back to doing whatever they want:

"California regulators admitted Thursday that for more than a year they didn't even try to enforce a million-dollar fine against health insurer Anthem Blue Cross because it feared they would be outgunned in court.

"In early 2007, the Department of Managed Health Care pledged to fine the state's largest insurer for "routinely rescinding health insurance policies in violation of state law."
"But they never did.

"The department's director, Cindy Ehnes, told The Associated Press on Thursday that, when it comes to rescissions, the agency has had success in forcing smaller insurers to reinstate illegally canceled policies and pay fines, but Blue Cross is too powerful to take on." [Emphasis added]

Clearly, regulation is not enough to curb insurance industry abuse. The only way to make private insurance companies accountable to the public is to have a public health insurance plan competing with them on a level playing field. That way we always have another choice if the insurance companies continue to abuse our trust.

President Obama knows the importance of such competition to real health care reform. That is why he emphasized his support for a public health insurance option in a letter [8] to Senator Edward M. Kennedy and Senator Max Baucus:

"I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest."

The sentiment is similar to the two pieces of advice on health care reform Paul Krugman gave Congress in his New York Times column [9]:

1) Don't trust the insurance industry.

2) Don't trust the insurance industry.

So don't let Congress rip the heart out of Obama's health care plan! Learn more about a public health insurance option [10].

And then stand with President Obama and Dr. Howard Dean to demand the choice of public health insurance by signing the petition today [11]!