Practices in Health Care and Disability Insurance:
Delay, Diminish,
Deny, and Blame
By Peter
Phillips and Bridget Thornton
“I once tried to explain to a Norwegian woman why it was so hard for me to find health insurance. I'd had breast cancer, I told her, and she looked at me blankly. "But then you really need insurance, right?" Of course, and that's why I couldn't have it.”
Barbara Ehrenreich, journalist and author
Introduction
This study examines the historical
circumstances that brought about our private health and disability insurance
system in the US. We look at the organizational structures of private-for-profit
and “non-profit” insurance companies that dominate the health care
industry and the strategies these firms use to delay, diminish, and
deny payment for health care and disability benefits for people across
the country. We discuss the impact of delays and denials on patients
and disabled individuals and the ways insurance companies deliberately
create psychological doubt and self-blame among those who are legitimately
entitled to benefits. We summarize the results of twenty extensive interviews
with people who have experienced major difficulties in receiving payments
of benefits and for heath care service they expected from their insurance
providers. We further examine the general lack of regulation, enforcement
of existing laws and government motivation to meet the health and disability
needs of all Americans, and the socio-economic power of the health insurance
industry to dominate health care policy.
Health and disability insurance
is an extremely large and profitable businesses. Increasingly, the health
and disability insurance industry has come under scrutiny for mismanagement
and blatant abuse of its policyholders. Michael Moore’s top-grossing
movie Sicko is one example of the growing concern surrounding
health care in the US.
In 2002, the World Health Organization
(WHO) put the cost of health care at 15.2 percent of US GDP (WHO 2006).
WHO reports, “The health-care industry, including biopharmaceutical
and medical device companies, now represents the third-largest sector
among the 1,000 largest US firms, behind only energy and retailing.”
(See Appendix A)
In order to understand how
insurance companies strategize to maximize profits and limit payouts
for benefits, we examined the evolution of the industry and the socio-economic
power base of the top health insurance companies in the US. The power
of the companies to set national policies contrasts with the personal
difficulties of the individuals interviewed, demonstrating a system-wide
process of profit taking at the expense of fulfilling promises and of
diverting money intended to pay for necessary health care goods and
services.
The experiences of the people
interviewed in this study are not necessarily representative of all
encounters with health and disability companies in the US. We recognize
that many people in this country have doctors who fight alongside their
patients to demand payment for promised treatment. Because of
the conflict of interest between health insurance company profits and
necessary health care for all, millions of people in the US do not receive
necessary health care and disability benefits, and suffer significant
negative consequences. We believe that the twenty interviewees are representative
of the general problems faced by an increasing number of US citizens.
Our interviewees were individuals,
insured by seven different companies, whose experiential commonalities
represent patterns of practices that should concern every American.
Given the upward trajectory of profits in the health and disability
insurance industry, coupled with an historical lack of regulatory enforcement
by federal and state government, we believe that the American people
do not receive the health care they deserve, despite the generous amount
of money spent on health services by taxpayers and consumers.
History of Health Insurance
in the US
The United States has been
slow to implement national social welfare programs compared to European
countries. The creation of social welfare and rudimentary public health
services with the Social Security Act of 1935 set the US on a path similar
to what European countries had in place for several decades. With the
Social Security Act, the US government instituted the Public Health
Service to conduct, “investigation of disease and problems of sanitation,”
yet national health care for all people has remained an elusive goal.
(Social Security Act-Section 603-1935) Findings by the Public Health
Service in 1938 reported widespread incidences of sickness and disability
among the American people and closely linked these to poverty conditions.
(Hirsh, 1939)
In 1965, President Johnson
signed legislation for senior and low-income health care, Medicare and
Medicaid, respectively. While the wealthy and upper middle classes have
generally been able to afford necessary health care in the US, the bottom
one-third of American society (one hundred million people) face limited
access to necessary health care. This bottom one hundred million people,
forty-seven million of whom have no health insurance whatsoever, are
disproportionately people of color and single women with children. These
inequalities of race and gender have led some researchers to conclude
that racism and sexism have historically played a major role in US health
care policy. (Quadagno 1994)
Throughout the 20th
century, there has been a discussion around building a national health
care system in the US. The National Conference on Charities and Corrections
in 1911 called for the establishment of social insurance programs in
the US including provisions against sickness and disability. (Hirsh,
1939) The American Association of Labor Legislation (AALL), founded
by political economists of the American Economic Association in 1906,
promoted state level laws for workmen’s compensation insurance and
achieved coverage for federal employees in 1916, Longshoremen in 1929,
and private employers in the District of Columbia in 1928. AALL was
“largely responsible for the first health insurance movement in America
by drafting the first American health insurance bills, but failed to
secure passage in national or state legislatures.” (Domhoff, 1971,
pp 175)
During the first half of the
20th century, the American Manufacturing Association and
the US Chamber of Commerce intensely opposed attempts for national and
state-level health care legislation. (Trattner 1989) Additionally, many
physicians opposed national health insurance for financial and professional
reasons, though this did not include all doctors. The American College
of Surgeons supported pre-paid health insurance for hospitalization
in 1934, but leaders in the American Medical Association generally opposed
national health care efforts. (Thomasson, 2002)
The beginning of employer-sponsored
health insurance plans started in the 1920s. At Baylor University Hospital
in Dallas, local teachers paid six dollars per year for the guarantee
of twenty-one days of hospitalization. In 1929, Blue Cross was the first
organization to offer pre-paid health insurance. The American Hospital
Association (AHA) supported similar plans around the country and eventually
hospitals joined together in inter-hospital associations at a state
level. Various states passed legislation that authorized tax-exempt
status to Blue Cross and later Blue Shield, as well as freedom from
the requirements of maintaining deep financial reserves that were legally
required of most insurance companies. (Thomasson 2002)
During the 1930s and 1940s,
the demand for professional medical services rose rapidly in the US
with improvements in surgical techniques, anti-biotic sulfonamide drugs
in 1935, and penicillin in 1946. During World War II, a wage freeze
in many industries encouraged the addition of medical insurance plans
as a way of attracting new workers to competitive industries.
Before World War II, only twenty
private insurance companies offered health insurance plans in the US.
This changed rapidly after the war and as private insurance companies
began to compete with Blue Cross and Blue Shield groups plans by offering
health insurance at lower rates to pre-screened healthy individuals.
By 1958, pre-paid health insurance plans covered seventy-five percent
of Americans. (Thomasson 2002)
The insurance industry in the
US remains severely under-regulated at the federal level. Instead, each
state adopts laws and regulations that govern insurance companies in
their states. A national insurance company may adopt a business
practice that one state deems legal while that same practice may be
illegal in another state.
While countries around the
world offer citizens necessary health care as a basic right, the US
has not adopted the same philosophy. According to the Universal Declaration
of Human Rights, health care is a vital right for every human being:
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” (Adopted by the United Nations December 10, 1948, Article 25)
What is the best way to insure
that all people in society have equal access to necessary health care
regardless of income? Should Americans tie health care to employment
or is it a basic right such as freedom of speech or voting? The Institute
of Medicine estimates that as many as eighteen thousand Americans die
prematurely each year because they do not have health insurance. (Institute
of Medicine 2004) This figure does not include those who die prematurely
each year because their insurers delay, diminish, or deny payment for
promised benefits. Reports about people who die unnecessarily from services
denied or delayed by insurance companies seldom receive broad coverage
in the corporate media. This has led to a nation of people uninformed
about how their ability to receive necessary health care and disability
benefits is driven and controlled by the private insurance industry
and how government regulations, regulators and insurance company interlocks
affect the level of care and benefits they receive.
The number of Americans without
health insurance is increasing — forty-seven million at last count,
or some sixteen percent of the population. The cost of health insurance
is rising two to three times faster than inflation, and unpaid medical
bills is the number one cause of personal bankruptcy in the country.
(Walter 2007)
How Health and Disability
Insurance Companies Dominate State Health Policy
Richard Ericson, Aaron Doyle,
and Dean Barry conducted the most extensive analysis to date of the
structure of the insurance industry. Their book, Insurance as Governance,
documents the historical interlocks between financial capital and government
in setting the standards for a profitable insurance industry in both
Canada and the US. (Ericson 2003) Ericson’s group conducted five years
of research including extensive interviews with two hundred twenty-four
people and numerous observations of insurance conferences, meetings,
and internal documents. Their research led to a comprehensive understanding
of the socio-political underpinnings and structural deficiencies of
the insurance industry. Ericson, Barry, and Doyle examined how the state
(sociological term for government) operates in a partnership with insurance
corporations in maintaining a profitable environment for capital growth
and expansion. The state is dependent on taxation for continued operation;
therefore, the maintenance of a positive business atmosphere is vital
to the self-preservation of state interests.
Key determinations cited in
Insurance as Governance include the following:
1. States betray their basic
duty to serve the general public welfare by mobilizing private insurance
corporations to establish regimes to serve collective well being.
2. States establish legal frameworks
to minimize risk to capital/property holders, set standards for operations,
provide capital, and support the conveyance of particular aspects of
the public domain into private hands.
3. States see people primarily
as consumers in support of private capital. The state conditionally
grants rights for individuals based on their conduct in a variety of
private, corporate, and quasi-public practices.
4. States increasingly support
risk control for private capital from natural disasters, technological
catastrophe, or civil unrest. States regulate individual behaviors to
lower personal risks and protect health insurance/disability investments.
States lower their risk using increased surveillance and law enforcement.
Additionally, states collect data to build risk assessment information
for private insurance companies.
5. Private insurance companies
interlock with the state in the desire for preventive security, increased
surveillance, risk minimization (such as state mandated seatbelt use),
and acceptable profit producing regulations.
In summary, the state works
in conjunction with health and disability insurance companies to maintain
profitability first, encourage healthy behaviors by citizens second,
and thirdly protect citizens from gross abuses by private firms when
absolutely needed.
In order to understand the
money and power connections of the health insurance industry, we look
at the boards of directors of nine of the largest insurance companies
and the affiliations of each member. (See appendix B) We found one hundred
thirteen board members who held one hundred fifty past and/or present
positions with major financial or investment institutions including
such major firms such as J.P. Morgan, Citigroup, Lord Abbett, Bank of
America, and Merrill-Lynch. These men and women sit on the boards of
financial corporations commanding $482.2 billion in annual revenues
in the US. (Department of Commerce 2006)
Additionally, these board members
have connections to some of the largest corporations in the world including
General Motors, IBM, Ford, Microsoft, and Coca Cola. We found direct
corporate affiliations among the one hundred thirteen health insurance
directors to thirty-four corporations on the Fortune 500 list for 2007,
which had a combined revenue of over 2.5 trillion dollars 2006.
The board members also held
or hold eighty-two governmental or government-related positions. These
positions range from members of the US House and Senate to Cabinet positions,
Ambassadors, Governors, State Insurance Commissioners, and Democrat
and Republican Parties posts that show a deeply embedded government-health
insurance industry inter-connectedness. Three board members actually
held positions in the Canadian government as well. Additionally, many
board members were/are affiliated with influential policy organizations
such as the Trilateral Commission, Brookings Institute, US-China Business
Council, US Chamber of Commerce, and The Business Roundtable. The board
members of the major health and disability insurance firms in the US
are a core element of the socio-economic-political elite in the US and
uniquely positioned to dominate health care policy-making decisions
for the American people.
Adding to their direct power
in the government, major financial institutions, and across many industries
in the US, the health insurance company directors also maintain some
thirty direct connections to media organizations in the US ranging from
local newspapers, radio, and TV stations to major corporations such
as ABC, Washington Post, Cox Communications, and AOL-Time Warner. Thus,
they are in a strong position to influence national media editorial
policy and news reporting perspectives on key health and disability
issues of the day.
Many of the board members have
cross-affiliations with the nine companies we researched, whereby board
members of one company serve on boards of other companies such as Wellpoint,
Unum, Blue Cross-Blue Shield, and Kaiser Permanente,
along with many connections to the pharmaceutical industry, health policy
organizations, and hospitals.
These board members tend to
hold industry-wide perspectives on protecting health insurance company
profits, maintaining a healthy business environment for long-term economic
growth, and insuring that any movement for expanded health care in the
US will maintain their companies as the primary officiators.
Examples of this working partnership
between the state and health and disability companies is evident in
how successful the insurance industry has been in achieving legislation
at state and national levels that protects their bottom line. The Employee
Retirement Income Security Act (ERISA) of 1974 is a federal law governing
pension plans. The courts have interpreted ERISA in such a way that
it severely limits the redress available to individuals who obtain their
healthcare or disability benefits through their employment. No matter
how egregious the mistreatment, the courts interpret the ERISA preemption
in such a way as to prevent punitive damages awarded to individuals.
While some ERISA claims may be tried in state courts, federal law is
usually applied. (Rosenblatt, 1999) The insurance companies know
that their loss, if the court rules against them, is negligible and
act accordingly to retain maximum profits.
An internal memorandum from
Provident, later purchased by Unum, reads:
“A task force has recently been established to promote the identification of policies covered by ERISA and to initiate active measures to get new and existing policies covered by ERISA. The advantages of ERISA coverage in litigious situations is enormous: state law is preempted by federal law, there are no jury trials, there are no compensatory or punitive damages, relief is usually limited to the amount of the benefit in question, and claims administrators may receive a deferential standard of review. The economic impact on Provident from having policies covered by ERISA could be significant. As an example, Glenn Fellon identified 12 claim situations where we settled for $7.8 million in the aggregate. If these 12 cases had been covered by ERISA, our liability would have been between zero and $0.5 million”. (Provident Internal Memorandum 1995)
As one of our study participants,
and a lawyer, stated:
“They (the insurance companies) know they’ve got ERISA on their favor. They’ll fight you to the death, to the bitter end because they got nothing to lose”.
ERISA puts the consumer at
a severe disadvantage in the legal system. The insurance industry has
legal teams that rival any industry in the country, with seemingly unlimited
funds to engage in endless litigation. Inside Counsel reports
that ten of the fifteen largest corporate legal departments in the US
belong to insurance companies. (InsideCounsel 2006)
Insurance companies sell “peace
of mind” and strive to convince the public that they are wise, trustworthy,
reliable, and interested in their customers’ health and welfare. Some
notable slogans and advisories by insurance companies include:
“Over 195 Years of Wisdom”
– The Hartford; “Manage for Today, Plan for Tomorrow” – The
Prudential; “Nothing is more important than the ability to be there
when our customers need us most following a disabling accident or illness.”
– Unum; “You are in good hands with Allstate” and “Like
a Good Neighbor State Farm is there.”
Health and disability insurance
companies maintain an ongoing lobbying effort in state capitals and
provide continuing campaign support to both parties. According to the
Center for Responsive Politics, the insurance lobby industry spends
$130,588,217 per year to influence state and federal politicians.
(CRC, 2006 Lobby Database) The Foundation for Taxpayer and Consumer
Rights reports, “The governor, the legislature, and political parties
[in California] have received $3,395,896 from the top five health insurers
and their lobbying associations since 2001.” (Flanagan 2007)
Insurance industry-sponsored
tort reform in the 1990s was supposed to curb the rate increases imposed
by insurance companies and ostensibly lower the risk to insurers in
the legal system by placing ceilings on the amount the insured could
win in the courts. However, the results were the opposite. With individuals
facing legal costs that often exceeded any possible settlement, insurance
companies have successfully stalled the legal system.
In 2006, Sociologist Jared
Barnes wrote, “Insurance rates have consistently increased since reforms
were initiated. Since payments have been capped, insurance customers
are having a very difficult time being awarded damages…The media hype
and insurance public relations campaigns have poisoned voters’ minds.
The only people benefiting from tort reform are the insurance companies.”
(Barnes 2006)
The Revolving Careers between
Business and Government
Individuals within the insurance
industry and the state often have a revolving door career, and serving
in positions within the industry, then government, or vice-versa. Revolving
door connections undoubtedly have an effect on the state enforcement
of insurance regulations. Cozy relationships tend to build between career-minded
individuals on both sides of the state/private company regulatory fence.
Many individuals, in both the state and private companies, see that
the maintenance of close working relationships between regulators and
the regulated as the building blocks for increased profits and personal
career advancement.
Bill Gausewitz was a major
player in Arnold Schwarzenegger’s campaign for governor in his former
position as Assistant Vice President of State Affairs for the American
Insurance Association. After Schwarzenegger’s election, the Governor
chose him to serve as director for the Office of Administrative Law
of California, which oversees and approves regulations, some of which
dealt with the insurance industry. In the summer of 2007, California
Department of Insurance (CDoI) Commissioner Steve Poizner chose Gausewitz
as the Special Counsel to the Insurance Commissioner of California.
The former California insurance commissioner (1986-91), Roxanie Gillespie, moved into the private sector providing legal counsel to insurance companies at the law firm Barger and Wolen in San Francisco. Her biography on the Barger and Wolen website states, “Her past experience includes 13 years with an insurance company in various law and management positions, plus eight years as a regulator, and five as California Insurance Commissioner. Her expertise includes all aspects of insurance regulatory law. She has worked with a large variety of insurance organizations, from start-ups to long established giants in the insurance field.”
In another case in California,
the former General Counsel of CDoI, Gary Cohen, left the department
in July of 2007 to become Deputy General Counsel of Allianz of America,
and General Counsel of Fireman’s Fund Insurance, an Allianz subsidiary.
While serving at the CDoI, Cohen directed corporate affairs, enforcement,
and fraud among other duties. (CDoI, February 28, 2007)
Health and Disability Insurance
Companies and the State Individualize Responsibility
The US has developed a system
of health care wherein private insurance companies, both for-profit
and non-profit, offer pre-paid insurance for medical services and disability
benefits. Since just before World War II, employment has been the primary
source for health and disability insurance for most Americans. However,
for the millions unemployed or in jobs without health benefits, insurance
policies can only be purchased as a personal/family plan directly from
private companies. Insurance companies can exclude people with poor
health or pre-existing conditions from enrollment or require them to
pay exorbitant premiums.
Consequently, the provision
of private health care goods and services in the US is remarkably different
from other industrialized countries where common pool single payer or
nationalized health care systems provide medical care for all people.
In the US, not only is the
state a key participant in protecting capital and profits in the health
insurance industry, the state serves as cultural risk manager by encouraging
an atmosphere of individual responsibility within the public. The state
in cooperation with private insurance companies promotes attitudes that
reinforce doubt, self-blame, and moral responsibility of the individual,
while de-emphasizing the duty of insurers to pay for promised benefits,
by increasingly linking illnesses and disease to personal lifestyle
choices. Health insurance companies understand that an individual is
less likely to demand expensive medical treatment for self-induced conditions
or when faced with the prospect of accusations of fraud when an individual
files a claim.
States and private insurance
companies advocate individual responsibility for health care through
a number of techniques. States pass laws that require certain behavioral
changes by individuals that will tend to reduce overall health care
demands. These include adherence to speed limits, the requirement of
seat belts, mandatory vaccinations, health codes, non-smoking laws,
and other health-related regulations. Additionally, states and private
insurance companies coordinate public education efforts through schools
and the media to encourage behaviors that will reduce health care demands.
For example, tobacco education programs in schools have reduced smoking
among teenagers. Such efforts benefit the health of the population.
However, it is also clear that these efforts reduce insurance payouts
as fewer smokers in society result in lower health care and disability
claims and therefore, payouts by insurance companies. There is no evidence,
clear or otherwise, that these lowered payouts have led to corresponding
reductions in premium costs.
The functional result of these
health care laws and educational efforts is to create a cultural climate
of individualized responsibility for accidents, illness, sickness, and
disease. This allows for the emergence of social-psychological assumptions
in the health insurance system whereby providers, insurance companies,
claims adjusters, health care providers, employers, and an individual’s
friends and family think in terms of what the individual may have done
in the past that contributed or caused the health problem or disability.
Therefore, instead of a health care insurance system that all promised
benefits to an individual regardless of contributing factors, we have
a system that diminishes responsibility for services by the providers
and refocuses the blame on the person in need of care. An insurance
provider may deny or delay a liver transplant to an alcoholic or person
with drug-related Hepatitis C, because those people have historically
engaged in unhealthy behaviors. Most people assume that everyone is
free to choose, although individual behaviors may be the consequence
of societal problems such as poverty, domestic abuse, or untreated mental
illness. Subjective value judgments within the health industry serve
to deny necessary services to the people most impacted by poverty and
social disadvantages.
While the public often views
state-sponsored health and prevention education as important efforts
toward the improvement of public health, there are other factors involved.
Foremost for the state are the protection of private insurance
capital and the lowering of costs for private health and disability
insurance companies. Secondarily, there are individual costs to people
when companies delay, diminish, or deny payment of claims and services
in the interest of profit. Insurance companies, operating in a culture
of accusation, doubt, and blame, justify these practices by suggesting
that customers are making false claims and are guilty of risky behavior.
A culture of blame and accusation
provides an opportunity for private health and disability insurance
companies to establish internal procedures that systematically limit
their payment for promised care because patients, who blame themselves
for their medical condition, are less likely to demand full benefits.
Blaming the Victim
Private health insurance companies
reduce costs by treating each person’s claim for health care or disability
with suspicion of fraud. (Ericson 2003)
The CDoI claims that insurance
fraud is ubiquitous. In a 2007 press release, Insurance Commissioner
Steve Poizner claimed, “Unfortunately, fraud is a major cost-driver
in the insurance system. These crimes impose a $500 'fraud tax' on every
man, woman and child in California. By attacking insurance fraud, we
can stimulate our economy”.
States, such as California,
require insurers to have Special Investigations Units to identify and
report on suspected insurance fraud – and there is a special multi-million
dollar fund to finance the investigation and prosecution of insurance
fraud. The state projects most of its efforts toward fraud committed
against insurers.
Inquiries to the CDoI regarding
how these “fraud” figures were determined, uncovered the fact that
they came from unverified insurance industry sources. Moreover, none
of these figures included any amount for fraud committed by insurance
companies. In fact, in a Backgrounder prepared by the CDoI for a Senate
Committee on Banking, Finance & Insurance - Oversight Hearing: Department
of Insurance - November 21, 2005, the Department acknowledged that there
had been no prosecution of insurers for fraud. (Senate Committee
on Banking, Finance, and Insurance, Oversight, 2005)
Built into institutionalized
blame is the assumption that the basis for the health or disability
claim is a mental condition, or a personal defect of the individual.
One of our interviewees stated, “You are guilty until proven innocent”.
Over half of the twenty people
interviewed in our study described feelings of personal responsibility
for their condition or were told by doctors, nurses, or claims managers
that the problem was their own fault.
A disabled lawyer said, “I
submitted a lot of medical evidence including positive lab test and
then having them come back and say that it is not unusual for these
symptoms to be caused by psychiatric illness”.
A University of California
graduate involved in an auto accident reported when asked if anyone
had ever blamed him for his condition, “Yes, most definitely. I was
asked to go through a variety of different physical examinations and
was asked very personal information. They would ask questions about
my past and …like my experience with drugs and alcohol as well as
previous jobs I had held. They really wanted to know as much a possible
about me …My insurance company kept on reiterating how the accident
was my own fault and that I should be more understanding because I was
at fault for the situation. This was very hard to deal with because
even though it was my fault, I was in pain and needed help which was
put on the back burner by the insurance company”.
At times, blaming can lead
to serious consequences, as in the case of a young women suffering from
severe back pain who eventually died. Her mother stated when asked about
blame, “Over a six month period she saw six doctors and was told the
pain was mental and given an antidepressant and narcotics. [I] never
had an x-ray. [She was] diagnosed six months later with Ewings Sarcoma
and died in four years. I as her mother felt personally responsible
because I could have fought harder and she would still be alive”.
A disabled-school teacher said,
“Patient blaming it’s called and [my HMO] is really good at it,
blaming the patient. [They] blame your psychological state, meaning
you have aches and pains and you’re depressed or something, they blame
it on that. Anyway that they can blame the patient, they would. The
doctor would pat me on the back and suggest counseling. The appeals
nurse called me the B word”.
Another interviewee said, “I
felt [my HMO] was calling me a nut case.”
An amputee with a Ph.D. talked
about blame entering into her communications about her case, “Indirectly
they did [blame] by the way the letters were written that were highly
suggestive that I had somehow screwed up…they are trying to instill
doubt, their letters were definitely intimidating. So when this happened
I fell into a pretty significant depression”.
At times interviewees described
how their employers joined in the blaming process. A disabled man with
herniated disks from a car accident, said, “My employer questioned
the extent of my injuries”.
A lumberyard worker talked
about how he accepted self-blame, “My boss called me an idiot for
not paying attention around the forklift. I felt like it could have
been prevented you know, If I was more alert…this would have not happened.
The insurance company made my case seem small and unimportant, like
I should not ever bother with them. They said it was my fault and they
were not responsible for the accident”.
A woman with severe neck and
back disabilities described her dealings with [HMO] for depression related
to her injuries, “they started coming up with borderline personality,
[statements] because I’d go to the psychiatrist at [the hospital]
and I’d say, ‘I need help, can you get these doctors to help me
with this real injury that’s going on? I’m so depressed. I’m feeling
suicidal. I can’t function. And then they put that in with your regular
patient record [to use against me later].”
Other interviewee statements
related to blame include the following from different individuals.
“I was treated like a criminal throughout the process. Details aside, it was devastating to me personally.”
“They blamed my disability on bringing this case against them.”
“They tried to turn my words on me at times to make it seem like it was my fault and not something worth filing.”
“I wanted to return [to work] before the doctor said I should and I ended up hurting myself again. After that, they were pressuring me to get back to work. They said it my fault the second time and that they were not responsible for that accident.”
The psychology of accusation,
suspicion, doubt, and blame extends throughout the insurance industry.
Auto insurance companies no longer describe a car wreck as an accident,
choosing instead to use the word collision, thereby implying personal
blame for the parties involved. (Ericson and Doyle, 2006) Health insurance
companies have incorporated immediate suspicion into their systems.
Insurance representatives expect people to exaggerate their symptoms
in order to increase benefits to which they are not entitled. They then
use this unsupported assumption to justify delaying, diminishing and
denying payment for promised services or benefits.
Victims of the Health and
Disability Insurance System
Over the course of three months,
students in the Investigative Sociology (Spring 2007) class at Sonoma
State University conducted face-to-face and e-mail interviews with twenty
adults identified by consumer advocate groups as people who had experienced
difficulties collecting benefits from health or disability insurance
companies. These individuals did not know each other, but their common
experiences demonstrate a growing trend within the insurance industry.
Under the current system, companies choose between paying for promised
benefits and maximizing profits.
Students transcribed the interviews
word-for-word, which allowed us to do a comparative analysis of the
twenty people based on common terms and quotes. The interviewees were
men and women from various socio-economic backgrounds, age groups, ethnicities,
education, and levels of illness or physical disability. Each of the
interviewees had experienced a problem with a disability or health insurance
claim. We found consistent patterns of delayed service, diminished care,
and denial of benefits in all twenty cases. The cases represented seven
different health and disability insurance companies. We deleted the
names of the companies from the interview quotes, as we believe that
these practices are a system-wide problem with most all health and disability
insurance companies involved.
As mentioned above, we uncovered
psychological patterns of accusation and suggestion of fraud as well
as blame placed on individuals for their own health and disability problems.
Inducing self-doubt and frustration into a claimant’s life is a way
of psychologically encouraging a patient to terminate the pursuit of
rightful benefits. Some of our participants suffered from severe disabilities
and spent years fighting their insurance companies for benefits. The
average time spent per week in trying to get benefits among our twenty
interviewees was 6.5 hours, which included waiting on hold, call transfers
to multiple representatives, travel to insurance company doctors, gathering
medical records, and filling out paperwork. None of the participants
obtained everything they had been promised.
The participants frequently encountered delays receiving medical records. In some cases, the claims process lasted years. One person reported seeing twenty-one different doctors during the course of the claim. All but two people interviewed filed appeals against the denial of benefits. We interviewed people who, for the most part, stood up for their rights, but millions of people withdraw early in the process due to fatigue and discouragement. Insurance companies know that delaying services will cause many people to give up, or perhaps die before they receive treatment. Companies also know that delaying and denying benefits results in greater profits as people become increasingly too weak to fight the system. Health and disability companies choose to maximize profits, retain earnings, and build reserves at the expense of the US consumer and taxpayer. They do so by systematically delaying, diminishing, and denying payments for promised services and benefits.
Delays by the insurance industry
were the most prevalent practice reported by our interviewees. All of
the participants interviewed experienced numerous delays including long
waits between correspondences, unreturned phone calls, and asked repeatedly
to communicate all the details of their case to insurance company representatives.
When asked about delays during
their dealings with health insurance companies, various interviewees
reported:
“My insurance company would take weeks, sometimes longer to make contact with me.”
“It was very uncertain when they (insurance company) would contact me regarding my situation, if at all. Sometimes I would simply not hear back from them at all.”
“I ended up hiring a lawyer because I simply could not deal with the waiting and the aggravation I felt with my insurance company.”
“[The insurance disability process] took almost ten months. This was very hard to deal with because I had no money for awhile and was not able to work, so I was barely able to keep afloat.”
The practice of delaying authorization
of payment for treatment or benefits, such as disability payments, seems
to be a standard method used by the companies to wear a person down
to the point where they give up on the claim. Interviewees reported
that:
“[The disability company] wore me out accommodating the reassessment questions.”
“The real sense that I got was that they were just trying to wear me out, and they actually did. I was just at a point where I was just ready for a compromise, like anything would be better than nothing.”
Out-of-pocket expenses were
enormous for interviewees asserting their rights to care and benefits.
Delays in the authorization of payment for treatment and disability
benefits consistently cost the interviewees in our study thousands of
dollars, and in one case over a million dollars. People never recouped
all of the legal and administrative costs of the claims process. For
most people, out-of-pocket expenses are financially devastating.
The following statements are
exact quotes from patients when asked about out-of-pocket expenses:
“I did eventually get payments but it took a long time and I ended up having to borrow money to cover myself, all the while trying to get better.”
“This cost me around $4000 before I received benefits.”
“It was going to cost me about $6000 to $8000 in fees, just to retain the attorney and then there was no guarantee that we would win because its arbitration and he (lawyer) felt that the arbitrators would be biased. So at that point I gave up.”
“Due to re-injury and not getting adequate treatment, I just lost my whole career. I had a nest egg of $40,000 and in the end it was all gone from seeking outside physical therapy, outside opinions, [and] traveling.”
“We spent about $750,000 and then we spent another couple of hundred thousand dollars trying to take it to the Supreme Court.”
“I would have worked since 1991…and saved approximately $300,000 in premiums had I known such unethical behavior was so commonplace in America. I spent my retirement and sold my home and business. I now no longer have any health care.”
“We spent probably close to $150,000 of our own money for stuff that we had to have done.”
“Filing
an appeal would have added another year to the process and I was rapidly
becoming destitute.”
Another method of delayed treatment
that many of our interviewees experienced was the request for excessive
information. People who are disabled are also attending doctor’s visits,
taking medication, and trying to survive daily life. Companies demanded
that claimants attend multiple doctors’ visits and submit all copies
of their medical records. Additionally, interviewees reported that companies
requested financial and employment information and would speak to friends,
colleagues, and employers; gathering information that was sometimes
completely unrelated to their claims. Interviewees stated that insurance
companies requested copies of the same records multiple times.
Interviewee quotes:
“They questioned people that never should have been approached. The insurance company has actually made it less likely that I can return to work, which is against both of our desires. We purchase these policies for peace of mind and security if and when we should need them.”
“The way in which [disability company] failed to properly investigate my claim caused my employer to think that I was not being honest about it. So it has been an absolute nightmare.”
“I had to give them all of my personal information. They wanted to know everything about me inside and out.”
“The [disability company] closed my claim while I was going through surgery for lack of medical documentation. This delay has cost me dearly. The process of making contact with the [disability company] was a severe hardship during my chemotherapy and [continues] until this day.”
Interviewees reported that
companies normally communicated within the timeframes required by law
in any given state. However, the responses would be incomplete or demand
additional information that resulted in long delays in receipt of health
care services and disability benefits. Health and disability insurance
companies have every reason to delay paying out benefits as long as
possible because retaining money adds to their invested reserves.
Given that every interview
participant experienced repeated delays of service, it is clear to us
that health and disability claims processes have deliberate internal
delay procedures built into the system. Managers and supervisors encourage
claims representatives to promote the long-term retention of the companies’
capital (patient premiums) by stringing out the claims process to delay
payouts for as long as possible. Companies are aware that people have
limited incomes and cannot afford prolonged struggles for benefits.
Frustrated, tired, and sick, people will often settle for smaller payouts
or diminished services when the insurance companies extend the claims
process for months and years. Many will give up altogether and simply
suffer at home or die without the services they were promised.
“Because of delayed payments that [disability company] owed me my finances became a mess. My farm went into foreclosure but I got my Social Security in time to save the farm from having to be sold. But my credit was ruined and I had been forced to withdraw all the money from my 401K ($290,000) resulting in substantial tax benefit losses. Prior to my illness I had $150,000 a year income and my 401K. After three years I was down to eighty dollars in the bank. I absolutely believe that insurance companies deliberately delay claims.”
Diminished payment for benefits
and treatment as well as ignoring the severity of a disability or illness
was the second most common experience of our participants. Almost all
of the participants in the study either had an insurance company doctor
tell them that their injury or illness was non-existent or that it did
not warrant expensive treatment. There were several participants who
visited doctors outside their insurance provider who adamantly disagreed
with the diagnosis or treatment of the doctors within the participants’
insurance plan.
A young man who was in an auto
accident and taken to the emergency room at [HMO Hospital] reported:
“The treatment was very short and the doctor tended to bypass my problems which really made me upset. It felt like he was so busy at all times and that I simply was not a priority from his perspective.”
Other interviewees stated:
“My doctor at [HMO] did not set my arm or even cast the arm…my bones healed wrong and set in a way that would cause permanent damage or the inability to use my arm”.
“They give you these pills. You are supposed to take 250mg and they give pills that are 500mg and they say, ‘well just cut them in half’.” (Goldsmith 2003)
Pill-splitting is a way to
cut co-pay costs for prescription medication. According to a researcher
at the University of Michigan, “Veterans' hospitals and some health
maintenance organizations (HMOs) have been requiring it of their patients
for years as a way to lower health care provider costs”. (Gnagey 2006)
Acknowledgement of severity
of injury or illness, and lack of pain management were some of the major
issues interviewees reported.
“I’d get patted on the back and he’d (doctor) say, ‘I can give you counseling for this.’ When actually my shoulder blade was not holding against my back, but he didn’t bother to really assess it.”
“They [HMO] would say ‘Oh, your muscles are probably sore. Just take it easy for a few days. But that wasn’t the case, my shoulder blade was damaged. Nobody ever really looked closely.”
“My insurance company had no idea about just how bad my situation was. They would often tell me to calm down and relax and that I just had a hurt arm and it would heal on its own. The idea that my insurance company was now my doctor was insane.”
“When [HMO] started their January 2004 policy of placing cancer patients at a lower priority to receive blood, in order to ensure [daughter] received blood and was able to continue her chemotherapy, I went off my chemo pills for four days to get it out of my system and lied about my medical condition in order to give blood. [HMO] nurses stated that it costs $500 per unit of blood from the Red Cross.”
“I’d get more information when I took my car in for a check up than I ever did when I’d go to the doctor. [HMO] does not ask questions about anything, they just want to get on to the next patient.”
One woman’s husband complained
of chest pains and tightness on his left side. When the nurse took his
blood pressure, it was extremely high. Despite these obvious warning
signs, the nurse sent the man home with pain pills.
“She [doctor] sent him for a shoulder [only] x-ray and sent him home with a prescription for 100 morphine pills, another valium prescription, and a referral to orthopedics. He died the next morning while I was at work and my two boys, ages 10 and 15 at the time, were at school.”
Commenting on the care a person
with chest pains receives at [HMO], one woman stated, “If you go in
there with chest pains, if it’s only been for a couple of hours, they’re
just going to tell you to take some aspirin and go home. It has to be
a minimum of six hours before they even recommend you to go into do
any testing.”
One woman told us that her
[HMO] doctor told her that the lumps in her breast were benign. She
demanded more tests that revealed breast cancer:
“My doctor [at HMO] did not like second opinions and results. My doctor did not want to do anything.”
“My doctor refused to give me any tests because he said this is expensive…you don’t need this or that. I was afraid that if I complained then he would call other doctors and I would not get good treatment.”
“He [the doctor] never showed up [after surgery]. I had to complain at the head of the department because he didn’t want to talk to me and my surgeon did not talk to anyone. They treated me as a joke.”
“[HMO] delayed chemotherapy three months in a row [because] the pharmacist stated she was too busy. At that time, I was sending letters to the medical Director and CEO of [HMO]. No one helped or cared.”
Given these testimonies and
severity of the issues described by the participants, we asked if they
escalated their complaints to departments in their state that oversee
the industry. Most of our participants’ complained that the State
ignored their grievances or told them that the State could do nothing:
“I complained to the California Department of Insurance and said that [Disability provider] used my psychotherapy notes to justify to the California Department of Insurance about their denial of my claim and they totally ignored everything I said in my administrative appeal. I found out that the authorization violated California law and brought that to [Disability provider’s] attention and they didn’t care. Everyone who’s in the California reassessment who has signed a [Disability provider] authorization has signed an authorization that violates that law (California Confidentiality of Medical Information Act).”
“The guy from the State Department of Managed Health Care (DMHC) basically told me that it would be a negative mark against them [HMO] but that he couldn’t do anything more than that until he had gotten several negative marks from other people.”
“When I went through the state department (DMHC) and found out that even they couldn’t help me even though they thought I had a strong case, I became really depressed.”
“The California Department of Managed Healthcare is a corrupt organization that oversees [HMO]. The more you bother them, the more they don’t want to hear from you. I was told frankly, to never call their agency again.”
While the state regulatory
agencies may not have the resources to assist all people with valid
complaints, Americans believe they have a legal system through which
to seek redress against an entities that breech a contract or perform
illegal acts. However, many of our participants could not acquire adequate
legal representation. Others spent a great deal of money on lawyers
and still did not get everything to which they were entitled:
“Nobody would take [HMO] on. I mean you can’t sue [HMO].’
“He (the lawyer) said for him it is not good money. He said if it (the maximum claim award) is worth $250,000 then it is not worth [it] to him.”
“If you don’t have attorneys you’re out of luck. I mean I’m an attorney and I needed an army.”
“I have a law degree and I can’t win, what chance do people with no education have? My next step is Federal court if I want anything. I’ll never be made whole from this situation.”
“I need an attorney to obtain the medical records I am required to release to others.”
The systematic act of offering
diminished benefits seems to be a standard practice for health and disability
insurance companies according to the people we interviewed. Every participant
experienced various forms of diminishment of services and many felt
the need to retain legal representation at their own expense. Companies
built systems of diminishment by discouraging doctors from ordering
expensive tests or using new treatments not yet authorized by the corporate
offices. Additionally, doctors must attend to many patients each day.
The pressures of the job translate to the patient as a lack of caring
or proper attention.
We hold medical doctors in great esteem and recognize that millions of people benefit from good medical care every day in the US. Nonetheless, several of our interviewees faced serious illnesses that went undiagnosed for significant periods of time. In two of the cases, the patients died. When profits take precedence over care, some patients will inevitably suffer serious health and financial problems.
Overt denial of promised benefits
is more serious. Each of the twenty interviewees we talked to faced
overt denial at sometime during their claim. Several of the interviewees
have gone through more than one denial process. We recognize that the
participants in our study are a select group of people who have experienced
major trauma, anxiety, and abuse from health and disability insurance
companies. In order to evaluate the issues, we researched two typical
companies in the industry to determine if overt denial of claims was
a deliberate practice.
Unum
Linda Nee, a former senior
claims processor for Unum and a current independent disability claims
consultant, discussed in an interview how her primary function at Unum
was to deny claims.
“Each processor is ordered
to deny a set dollar amount of claims each month and if the target was
not achieved, they lost their jobs.” (personal communication, February
2007)
Unum, the largest disability
insurance provider in the US, covers twenty-five million working people.
(Unum, 2007) In the 1990s, Unum profits rose from a series of mergers
with Provident and Paul Revere. As the profits rose, so did the number
of denied legitimate claims. Many of these Unum clients came to realize
that the insurance company that sold them “peace of mind” had a
stronger commitment to profits than to fulfilling its promises to its
customers.
In 2003, New York State Attorney
General Elliott Spitzer began an investigation into the claims handling
practices at Unum. Policyholders complained of long delays in receiving
payments, independent doctor exams that provided results contrary to
Unum records, and of reduced benefit payments. Spitzer, along with Insurance
Commissioners from around the US uncovered a web of corruption that
affected people in all 50 states.
In March 2003, Georgia Insurance
Commissioner John W. Oxendine issued an order stemming from an examination
of Unum’s disability insurance claims practices. He imposed a $1 million
fine, and ordered Unum to change its claims practices. (BestWire, March
19, 2003) In an L.A. Times article, Peter Gosselin states that
in California, Unum committed “violations of state law in nearly one-third
of a random sample of about 1,000 claims handled by UnumProvident.”
(Gosselin 2003)
Delaying and denying claims
proves profitable according to Linda Nee, “When claims are denied
in a certain month, Unum receives profit realized in that month. Let’s
say all claims denied in March contribute toward profit on March’s
Profit and Loss Statement. The insured appeals the denial…nothing
changes…the appeal takes six months…nothing changes, the profit
is still realized…insured gets an attorney…nothing changes, motion
filed…nothing changes and finally two years later a settlement for
sixty-five percent of the claim reserve is made on the courthouse steps.
Unum opens the claim and pays at the sixty-five percent rate and shows
a thirty-five percent profit on the financial end in addition to the
profit recorded in March when the claim was denied.” (Personal communication,
June 2007)
According to Nee, Unum employees
were encouraged to deny claims over a certain dollar amount, with monthly
bonuses for adjusters with the lowest dollar amount of claims. Nee reported
that Unum would pay the claim for a few years, and then send notices
threatening denial of payments because the claimant did not provide
sufficient evidence to support the disability. In other cases, the company
would force the claimant to apply for Social Security Disability Insurance
(SSDI) and deem the claimant totally disabled in order to qualify for
the federal benefits.
Ultimately, forty-eight states
settled with Unum under the Multistate Settlement Agreement (MSA). Under
the MSA, Unum it was touted that Unum would reassess approximately 215,000
claims it had previously denied and pay a negligible fine in relation
to the financial benefits Unum reaped by its wrongful conduct. Unum
was not required to admit any wrongdoing and states offered inadequate
independent review of the claims that required reassessment. (Belth,
2004)
Former Insurance Commissioner
of California, John Garamendi, referred to Unum as “an outlaw company…that for years has operated in an illegal
fashion. Our settlement is designed to make it a poster child of a legal
company.”
(Gosselin 2003) However, the fine imposed by California was only eight
million dollars. This was approximately the same amount Unum was forced
to pay to a single California policyholder in one of the many thousands
of lawsuits that had been filed against the company since the late 1990s.
(Hangarter) It is an insignificant amount compared to Unum’s
2006 sales of $10.5 billion dollars.
After the separate settlement with Unum in California, the state refused to require an admission of wrongdoing by Unum, but did issue detailed findings of wrongful conduct. The California Settlement Agreement (“CSA”) also contains additional conditions, beneficial to policyholders that could, if fully enforced, bring to an end much of Unum’s wrongful conduct. Pursuant to the CSA, the media reported that Unum was to reassess 26,000 claims dating back to 1997 by June 30, 2007. This settlement required the company to develop an internal system to reassess their claims. In the CSA, with only marginally greater oversight than in the MSA, the Insurance Commissioner essentially trusted Unum to reassess these claims by standards agreed upon by the state and the company.
As of June 30, 2007, CDoI reported
that Unum made 2,529 reassessment decisions where the company upheld
1,353 claims that were previously denied, reopened, paid, and closed
579 claims, and reopened, paid, and continued benefits for 485 claims.
These figures came with no information concerning the methodology of
the reassessment numbers and the CDoI did not provide the number of
claims that went to an independent reviewer. Nor did it address why
Unum reassessed only nine percent of the 26,000 claims that they were
required to examine. As of August 2007, the CDoI has not provided a
final report.
Unum came under the review
of fifty insurance commissioners and was found to have engaged in illegal
business practices, yet continues to operate with little state oversight
or regulation.
Kaiser Permanente
There are hundreds of “non-profit”
health insurance plans and hospitals in the US. These hospitals operate
under tax-exempt status. In return, the organizations must provide free
and reduced services to low-income residents in the community in which
they operate. A 2007 report by the Internal Revenue Service determined
that forty-five percent of not-for-profit hospitals and health plans
devoted three percent or less of their revenue to uncompensated care,
and twenty-five percent of these institutions spent less than one percent
of revenue on such care. (Francis 2007)) In 2002, the entire non-profit
industry gained twelve billion dollars in tax breaks for providing limited
care to low-income patients. (Flanagan 2007)
The Public Policy Institute
of California conducted a study on the effect of hospital ownership
in California and determined, “As the nonprofits behave more like
the for-profits, nonprofit control of the market should be monitored
with the same vigilance as for-profits.”(Public Policy Institute 1999)
Non-profit hospitals were required to offer charitable contributions
to the public in order to qualify for tax-exemptions, but since 1969
the federal government has been lax on its requirements, instead settling
for health fairs and disease screenings. (Pear 2006) Catholic Healthcare
West, a not-for-profit entity, settled a class action lawsuit in 2006,
which accused them of overcharging the uninsured. They agreed to refunds
for 750,000 people. (Hoover’s 2007)
Kaiser is one example of the
problems associated with the for-profit model of US insurance and is
not unique in its practices. In order to compete for members and profits,
non-profit and for-profit HMOs, must employ similar business methods.
While Kaiser Foundation Health Plan does not show profit in the same
way as for-profit companies such as Wellpoint, it invests money into
marketing and advertising, raises rates, and institutes cost-cutting
measures to increase its income and reserves.
The Foundation for Taxpayer
and Consumer Rights (FTCR) claims that Kaiser’s overhead has caused
the consumer to pay increased rates. “Overhead costs—including advertising,
administration, and CEO salaries—have become the fastest growing component
of health care spending”. (Flanagan 2007) Kaiser is able to declare
non-profit status by placing their excess income in reserve accounts.
The California Department of Managed Healthcare requires Kaiser to maintain
a minimum level of reserves and, according to FTCR, Kaiser has $9.3
billion in excess reserves. (Flanagan 2007)
The practice of declaring non-profit
status while increasing cash reserves and denying care has roots in
the Nixon administration. A recording of a conversation about Kaiser
and the HMO industry reveals that President Nixon and Presidential Advisor
John Erlichman viewed the profit-before-care model favorably:
Ehrlichman: Edgar Kaiser is running his Permanente deal for profit. And the reason that he can—the reason he can do it—I had Edgar Kaiser come in—talk to me about this and I went into it in some depth. All the incentives are toward less medical care, because—
President Nixon: [Unclear.]
Ehrlichman: —the less care they give them, the more money they make.
President Nixon: Fine. [Unclear.]
Ehrlichman: [Unclear] and the incentives run the right way.
President Nixon: Not bad. (Kaiser Papers from the Nixon Tapes, 1971)
Kaiser continues to increase
revenues and membership despite numerous reports of abuse. In July of
2007, Kaiser was assessed a $3 million fine for its “haphazard investigations
of questionable care, physician performance and patient complaints”
in California. (Weber, 2007) Additional charges and fines were level
against a kidney transplant program that persuaded members to leave
well-established transplant hospitals because Kaiser would no longer
pay the expense outside its own facility. The program had numerous delays,
which led to a dramatic decrease in patients receiving transplants.
(San Francisco Chronicle June 24, 2006) In another case, Kaiser dumped
disoriented, disabled, or otherwise ill patients on sidewalks outside
homeless shelters. (Winton November 16, 2006)
In response to these situations
of abuse, California inspectors at the Department of Managed Health
Care investigated patient complaints of poor care. The inspection focused
on determining how Kaiser handled the complaints, not on the nature
of the complaints. (Weber July 25, 2007) These examples, among others,
have resulted in fines of just a few million dollars.
Kaiser also benefits from a
mandatory arbitration system that has little oversight from state or
federal agencies. Arbitration forces a client to take a complaint to
an arbitrator, for whom one must either pay or relinquish claims beyond
a certain dollar amount, rather than taking it to court. Arbitration
settlements generally provide less than the amount a plaintiff would
win through the legal system.
Our interviewees covered by
Kaiser claimed that arbitration was costly and biased.
“They make you sign an arbitration agreement form saying that if you have any problems with them (Kaiser) you agree to go to arbitration. They get to choose the arbitrators, and the arbitrators you know, just by logic, are biased because obviously, if they want to work, they need to somewhat side in the favor of Kaiser or Kaiser isn’t going to choose them”.
“We had been [Kaiser] members for so long we hadn’t signed the arbitration agreement and they came in with the paper while having a bypass surgery. He was so heavily medicated on morphine, he was so drugged out of his mind, in such immense pain, and they made him sign the paper, and that held up too in arbitration”.
“So what they do is, if they settle the case nothing goes on that doctor’s record [malpractice], because they settled it not admitting guilt, it’s just settling. So there is nothing on the doctor’s medical record. You are limited on what you can win at arbitration even for medical malpractice. It’s $250,000”.
“The only question that the Kaiser attorney asked us when we were on the stand is ‘so you drive a Mercedes, is that right?’ because he wants the arbitrator to known these people don’t need our money”.
Kaiser’s arbitration system
came under scrutiny in 1997 when state investigations showed that Kaiser
delayed arbitration on the death of a man because the settlement amount
was less after death. (California Research Bureau, 1997)
Kaiser provides examples of
practices that occur throughout the “non-profit” and for-profit
health insurance industry.
Overt denials occur repeatedly
in both profit and non-profit insurance organizations
“Over four days, sudden onset of terrible stiffness and pain in hips. Kaiser diagnosed me with Polymyalgia Rheumatica and refused to review diagnosis. I didn’t believe arthritis came on so quickly. When I ‘Googled’ sudden onset arthritis, I kept getting shown sites for Lyme disease. I found a specialist outside of Kaiser and he tested me. [He] diagnosed Ehrlichia and Lyme disease. When the doctor’s office sent the bill to Kaiser, it took them about eight weeks to send the first rejection. Kaiser said that this was not an emergency claim and would not be paid”.
“I am told by my Lyme doctors that they’re not going to pay for antibiotics past a one-month period, and one month of antibiotics for Lyme is not enough, unless you get diagnosed immediately”.
The stories from our interviewees
offer a glimpse into the circumstances experienced by many people in
US seeking reliable, affordable, and safe health and disability care.
The idea of insurance is to allow the people of a society to share a
collective risk by pooling their resources to ease the loss of one member
of the group so as not to cause a negative rippling effect throughout
the community. If companies deny care, a person will likely continue
a downward spiral in health, loss of income, and eventually become dependent
on the state for care or simply die. Either way society inevitably suffers
from the person’s loss of productivity or the high cost of late term
care for the dieing.
Unum, a for-profit disability
company and Kaiser, a non-profit HMO have large reserves and millions
of members. They both use similar practices to delay, diminish, and
denial the payment of benefits. Kaiser and Unum are not unique in the
health and disability insurance industry in which profits and reserves
supersede payment for promised care and other benefits. As a result,
a significant number of policyholders experience serious negative
consequences.
Private Profit vs. A Common
Pool, Single Payer System
In the US, private insurance
companies sell health insurance to individuals and employers. Insurance
companies do not provide any health care goods or services. They are
the broker between the consumers and the providers of health care. Most
people obtain health and disability insurance through employment related
group plans. However, if one is not a member of a group plan; one must
purchase an individual policy. If one cannot afford to purchase health
or disability insurance. A person must be very low-income or elderly
to qualify for state-subsidized care.
The debate over a public common
pool, single-payer health care system versus our current system, dominated
by private insurance company involvement is gaining momentum. The private
insurance companies and HMOs have a desire to remain in the system and
continue to make huge profits. In Massachusetts, private insurance companies
pushed forward mandatory universal healthcare by requiring that everyone
purchase health insurance. Other states are considering following suit.
President Bush, with the support
of Congress, reformed Medicare in 2002, which increasingly privatized
the system and boosted the profits of insurance companies. Bush also
promised to veto a bill that expanded health care coverage to low-income
children. In both cases, the President insists that the private sector
is better at managing health care than the government. According to
Bush, “Expansion of government in lieu of making the necessary changes
to encourage a consumer-based system is not acceptable." (Lee 2007)
An example of the profiteering
associated with mandatory privatized health insurance is a purchase
made by a company owned by William Henry Trotter Bush, brother of H.W.
Bush. Hoping to reap the profits of expanded private medical spending,
WHT Bush, principal in Bush O’Donnell, acquired Community CarePlus,
a Medicaid HMO in Missouri. According to the company’s press release,
Community Care Plus had the “highest percentage return on revenue
of the Medicaid HMOs operating in metro St. Louis.” (Deslodge 2004)
Private insurance companies
are motivated to make as much money as possible and do so by systematically
delaying, diminishing, and denying payment for promised services, and
blaming individuals for their misfortunes. The state officiates
in this process by maintaining health care for the poorest and protecting
profits of the major providers with limited enforcement of regulation.
However, most of the industrialized
countries in the world manage to provide all their citizens (and in
some countries, immigrants) with relatively efficient, state-of-the-art
health care that is paid for with taxes. While many proponents of private
insurance argue that the citizens in these countries pay higher taxes,
the individual cost to taxpayers is actually substantially less than
the amount individuals and employers pay in health and disability care
premiums and related expenses in the US. The total per capita health
care costs in the US exceed health care costs of all other industrial
countries, yet we leave huge gaps in service and systematically deny
benefits to many of those in need. (WHO 2006)
Countries with common pool
or single-payer health care systems provide similar levels of service
to every person. In the US, insurance companies are not required to
sell policies to people with pre-existing conditions, leaving many without
care unless they qualify for Medicare, Medicaid, or other public programs.
Private insurance companies are in fact motivated to delay, diminish,
and deny care whenever they can. States assist them in this process
by supporting limitations on access to the courts and adequate redress,
and by engaging in minimum or illusory regulatory enforcement.
Countries with common pool
or single-payer systems do not tie health insurance to employment. In
such countries, it is the responsibility of society as a whole to provide
health care for each individual. In these societies it is understood
that a person without access to proper health care is likely to become
less productive and a bigger financial burden on society in the future.
The single-payer advocacy group,
Physicians for a National Health Program reports that private insurance
corporations spend an enormous amount of money on business-oriented
expenses rather than health-related investments. Competition among private
companies creates waste and duplication. According to a physician advocacy
group, “When, for example, hospitals compete they often duplicate
expensive equipment in order to corner more of the market. This drives
up overall medical costs to pay for the equipment. They also waste money
on advertising and marketing. The preferred scenario has hospitals coordinating
services and cooperating to meet the needs of the public.” (Physicians
for a National Health Program, 2007)
A 2003 study in the New England
Journal of Medicine estimates that spending for the administrative costs
associated with health care amount to over $320 billion per year, or
about thirty-one percent of overall health care costs in the US. This
figure includes hospital administrative costs and time spent by doctors,
nursing homes, and other home health providers on administering insurance
claims. The study also takes into account the amount of money private
insurers spend on costs not found in single payer systems, “Underwriting
and marketing, account for about two-thirds of private insurers overhead.”
The administrative costs in the Canadian national healthcare system
amount to 16.7 percent, or about half of the administrative overhead
of insurance costs in the US. (Woolhandler 2003)
The figure above does not consider
the time and out-of-pocket expenses incurred by individuals and families
related to personal administration of the policies and claims.
A January 2007 article in the Bloomberg News reported, “A new study
says that $2.3 billion worth of time is spent in waiting rooms, doctors’
offices, hospitals and transportation in the first year after cancer
is diagnosed. The study did not look at the value of time spent by members
of a patient’s family”. (Bloomberg, January 3, 2007)
Inflated health care costs
and limits on care in the US have very negative consequences for many
families. A 2001 study conducted by professors from Harvard and Ohio
University revealed that medical bills lead to one-half the bankruptcies
filed in the US:
“In 2001 1.458 million American families filed for bankruptcy…About half cited medical causes, which indicates that 1.9–2.2 million Americans (filers plus dependents) experienced medical bankruptcy annually. Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness. Medical debtors were 42 percent more likely than other debtors to experience lapses in coverage. Even middle-class insured families often fall prey to financial catastrophe when sick.” (Health Affairs, 2005)
State legislators, such as
Shiela Kuehl of California, have introduced legislation for a single-payer
system for their states.1 Of the 2008 presidential candidates,
only Dennis Kucinich advocates for a single-payer system.
People in the US have a choice.
They can continue with the profit-driven private insurance health care
system leaving many millions to languish without care, and many millions
more to face the frustrations of systematic delays, diminishment, and
denials of promised benefits. Alternatively, they can build a common
pool health care system that provides necessary health care to everyone
– for less than we are paying now.
CONCLUSION
Each person interviewed for
this study had insurance at the onset of his or her malady. They paid
monthly premiums through employer sponsored plans or had purchased individual/family
policies directly from insurance companies. The people in this study
believed they would receive the benefits they were promised in the event
of an accident, disease, or illness. The management practices of the
health or disability insurance company delayed, diminished, and denied
payment for expected benefits.
Health and Disability Insurance
companies are for-profit entities, despite some organizations operating
under tax-exempt status. Customer care and quality of service falls
to second place under this profit-driven model of health care. These
practices are part of a growing structural arrangement between the private
insurance business and government that is unlikely to be undone without
substantial grassroots pressure and extensive government re-regulation.
As a health care regulator, the state is working for the benefit of
capital expansion instead of health care for every person. In fact,
the state is motivated to extensively regulate individual behavior and
ignore corporate malfeasance.
At the beginning of this study,
Barbara Ehrenreich, former State University of New York professor, journalist,
and author of several books, states that she was unable to procure insurance
because she had breast cancer. She goes on to state,
“This is not because health insurance executives are meaner than other people, although I do not rule that out. It's just that they're running a business, the purpose of which is not to make people healthy, but to make money, and they do very well at that. Once, many years ago, I complained to the left-wing economist Paul Sweezey that America had no real health system. ‘We have a system all right,’ he responded, ‘it's just a system for doing something else.’ A system, as he might have put it today, for extracting money from the vulnerable and putting it into the pockets of the rich.” (Ehrenreich 2007)
Private insurance has a structural
motivation to delay, diminish, and deny payment for promised benefits,
in order to maintain profit margins. They use these profits to propagandize
the American public and influence voters through scare tactics of “socialized
medicine” and long delays of service that supposedly occur in single-payer
systems. Using corporate media and massive political donations to both
parties, private health insurance companies have increased profits and
maintained their influence in the system. The state complies with this
arrangement and individuals within the systems use this compliance for
revolving door career advancement.
With its focus on profits,
the industry has the power to deny life-saving procedures in the interest
of profits. John A. Humbach, professor of law at Pace University, argues
for criminal prosecution of HMO Denial:
“When people do things that they know are almost certain to have lethal consequences, and death results, criminal prosecution for homicide is normally called for. The existing criminal law provides no obvious reason why there should be an exception for actions by HMO functionaries who prevent their companies from performing their legal duties to authorize and pay for critical medical care.”
“Criminal sanctions in this country are not primarily aimed at people like HMO managers and administrative personnel, but are mostly intended for a very different segment of society.” (Humbach)
In times of crisis, the people
in the US have joined social movements to demand justice and government
action. The progressive movement in the early 20th century
gained stronger regulations on medicines, medical education, and health
care delivery systems. During the Depression, the Labor Movement won
the Social Security Act and the expansion of disability and health care
benefits for employees. The Civil Rights Movement and the War on Poverty
led to Medicare and Medicaid.
The people in this study never
anticipated the ways in which their lives would be changed by an inadequate
and profit-driven system. They had health and disability insurance to
protect them from insolvency and provide them with a minimum level of
care and comfort. However, the companies with which the participants
dealt managed to compound pain, trauma, and suffering instead of relieving
it.
Adequate health care for everyone
is a human right, acknowledged by the world in the 1948 United Nation’s
Declaration of Human Rights. Most Americans pay higher combined taxes,
health and disability insurance premiums, co-payments, and various health-related
expenses than citizens in common pool, single-payer systems, yet, those
countries allow all their citizens equal access to services. When the
American people collectively decide that health care and basic social
security is a right, which belongs to everyone, the health and disability
system can be changed to provide necessary benefits for all.
“People don’t want to believe that it’s happening. They are so busy with their lives; they don’t care until it happens to them. Thing is that when it does happen to them, it’s too late. We could have cared less about health insurance until this happened to us.” Study Participant
Peter Phillips is a Professor
of Sociology at Sonoma State University and Director of Project Censored.
Bridget Thornton is a graduate student in the Interdisciplinary Studies
Master program with specialties in Gender studies, History, and Sociology.
The following Sonoma State University students in the Spring Investigative
Sociology class assisted with this study: David Abbott, Brandon Beccio,
Daniela Bravo, Laura Buck, Chris Castro, Andrew Kent, Chris Morello,
Brian Murphy, Debra Sedeno, Kimberly Soho, Yuri Wittman.
Funding for this study provided by
JustHealth,(www.justhealthnow.org) a non-profit public benefit corporation,
working to create a just healthcare system through individual advocacy
for consumers and providers, education, legislative, and regulatory
reforms.
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APPENDIX
A
2006 Income and Growth of Major Health and Disability Insurance Providers
(Source: 2007
Fortune 500 Companies)
$ in millions Profits Revenue AIG 14,048.0 113,194.0 Berkshire Hathaway 11,015.0 98,539.0 Prudential 32,488.0 3,428.0 Hartford 2,745.0 26,500.0 Cigna 16,547.0 1,155.0 Wellpoint 3,094.9 56,953.0 Aetna 1,701.7 25,568.6 Humana 487.4 21,416.5 Unum Group 10,718.8 411.0 TOTAL $92,845.8 $347,165.1
APPENDIX B
Key: G=Government
Affiliation; M=Media Affiliation; F=Financial Affiliation
PRUDENTIAL
Gilbert Fran Casellas
Mintz Levin Cohn Ferris Glovsky & Popeo, PC
Casellas & Associates LLC
Q-linx Inc. He
Swarthmore Group Inc.
McConnell Valdes LLP
(G) US Equal Employment Opportunity Commission
(G) US Department of the Air
Force
James G. Cullen
Bell Atlantic Corp.
Agilent Technologies Inc.
Neustar Inc
Johnson & Johnson
Quantum Bridge Communications Inc
(F) First Fidelity Bancorporation
James A. Unruh
(F) Alerion Capital Group, LLC.
Unisys Corporation
Fairchild Camera and Instrument Corporation
Memorex Corporation
Tenet Healthcare Corporation
BioVigiliant Systems, Inc.
LumenIQ, Inc.
Apex Microtechnology.
Frederic K. Becker
Wilentz Goldman & Spitzer
P.A.
Jon F. Hanson
Healthsouth Corp.
National Football Foundation
CD&L Inc
Gemini Industries Inc
Yankee Entertainment
Sports Network LLC (YES Network)
Pascack Community Bank
Wickes Inc.
New Jersey Sports and Exposition Authority
Hackensack University Medical
Center
Constance Horner
Brookings Institution
US Commission on Civil Rights
Princeton University
Johns Hopkins University
(G) Associate Director for Economics and Government of the Office of Management and Budget (Ronald Reagan)
(G) Office of Personnel Management (Ronald Reagan)
(G) White House as Assistant to President George H. W. Bush
(G) Director of Presidential Personnel
(G) Deputy Secretary of US Department of Health and Human Services
Ingersoll-Rand Co. Ltd.
Bobcat Company
Pfizer Inc.
Foster Wheeler Ltd.
Annie E. Casey Foundation
(G) US Department of Defense Advisory Committee on Women in the Services
National Academy of Public
Administration.
William H. Gray III
Buchanan, Ingersoll & Rooney PC
United Negro College Fund (UNCF)
Bright Hope Baptist Church
Amani Group
(F) J.P. Morgan Chase & Co.
Dell Inc.
Pfizer Inc.
Visteon Corp.
Foster Wheeler Ltd.
MBIA Inc., Municipal Bond Investors Assurance Corporation
Rockwell International Corporation
Union Pacific Corporation
(F) The Chase Manhattan Bank, N.A.
Warner-Lambert Co.
(M)Viacom Inc.
E