United Healthcare Stops Offering Insurance to Children

[Gone4Good]

Wellpoint just reported last week in response to the story about breast cancer targeting that less than 1/10th of 1% of all policies were rescinded in 2009.

That is an irrelevant and highly misleading statistic. The relevant statistic is "what percentage of women diagnosed with breast cancer in 2009 had their policies dropped." I doubt we'll see Wellpoint advertise that number.

Here's what they were doing, by the way . . .

They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.

And this isn't exclusive to Wellpoint, and certainly not exclusive to breast cancer. Here's a similar story about Assurant (previously Fortis) using a similar computer algorithm to identify HIV patients.

 

[Gone4Good]

Here's an old blog describing the math behind the low percentage "recission numbers". The punch line is that if you have very high health care costs your chance of facing recission is about 50% even if only one-half of one percent of all policies are recinded.

Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.

An individual adult insurance plan is roughly $7,000 (varies dramatically by age and somewhat by sex and location).

It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn’t make a lot of sense for the insurance company to take the nuclear option of blowing up the policy. $11,487 in claims is less than two years’ premium; less than one if the individual has family coverage in the $12,000 price range. But that top one percent, the folks responsible for more than $35,000 of costs – sometimes far, far more – well there, ladies and gentlemen, is where the money comes in. Once an insurance company knows that Sally has breast cancer, it has already seen the goat; it knows it wants nothing to do with Sally.


If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two. You have three times better odds playing Russian Roulette.

 

[dgoldenz]

That is an irrelevant and highly misleading statistic. The relevant statistic is "what percentage of women diagnosed with breast cancer in 2009 had their policies dropped." I doubt we'll see Wellpoint advertise that number.

Here's what they were doing, by the way . . .

And this isn't exclusive to Wellpoint, and certainly not exclusive to breast cancer. Here's a similar story about Assurant (previously Fortis) using a similar computer algorithm to identify HIV patients.

I know all about the Assurant case, which is why I mentioned them. That was clearly a big-time screw-up by the company and they paid dearly for it. Insurance companies are VERY careful of who they rescind for this exact reason - if they are wrong, they will get the pants sued off of them and every lawyer will be lined up to take the case.

Wellpoint posted a response to the Reuters article, which I'm sure you either didn't see or didn't read:

http://www.wellpoint.com/pdf/HHS_Letter.pdf

WellPoint > News Article General

Key sections:

-The story also misstates the role of what it terms computer algorithms. Contrary to how its use was portrayed in the story, such software is used to look at a series of diagnostic codes meant to capture conditions that applicants would likely have known about at the time they applied for coverage. We do not single out breast cancer or pregnancy.

-In fact, last year less than one-tenth of 1 percent of our individual members' policies were rescinded.

-Another significant error in the Reuters story is that WellPoint rescinded coverage to Robin Beaton. As noted during her public testimony during the US House Energy and Commerce Committee hearing, Ms. Beaton is NOT a WellPoint member, but rather was insured by another company.

-Yet another inaccuracy is the false implication at the beginning of the article that Ms. Reilling's coverage was dropped due to breast cancer. If Ms. Reilling would be willing to sign a HIPAA waiver, we would be happy to disclose the facts in her case. Also a small point, but indicative of the inaccurate reporting in this story, Reuters misspells Ms. Reilling's name repeatedly throughout.

 

[Gone4Good]

Wellpoint posted a response to the Reuters article, which I'm sure you either didn't see or didn't read:

I saw it and it is basically bunk. I don't accept their assertion that they are not targeting sick people when they have every financial incentive in the world to do it, their CEO's refused to say they would stop doing it on national T.V. and in front of Congress, and other companies in the industry have been caught doing it. I mean seriously. If they weren't doing it why wouldn't the CEO's have said they would stop in cases where fraud wasn't obvious when asked by Congress last year? If it wasn't a big number, or important, why would all three CEO's sit there and tell Congress they were going to keep on rescinding policies even in cases were fraud wasn't obvious? A press release isn't as telling as CEO testimony before Congress.

They also repeat the same meaningless statistic about how many recissions they have in their entire insurance pool when the real question is "how many recessions do you have among the sickest population in your insurance pool."

 

[Gone4Good]

Besides, the mere fact that we're even having a discussion about how many sick people get dropped from insurance is proof enough that the system is broken and needs to be radically altered.

 

[dgoldenz]

Besides, the mere fact that we're even having a discussion about how many sick people get dropped from insurance is proof enough that the system is broken and needs to be radically altered.

See my response in the other thread for sensible solutions that would work. No doubt the system is screwed up the way it is, but you have to work with what's there. Either that or we can all pay through the nose in 2014, which is what we're on track for.