Health Insurance Crisis

A recent article in the LA Times discussed a different type of health insurance crisis affecting small business owners and people with individual health insurance policies. The crisis is very real and not a feigned one resting on catchy slogans. In fact, the crisis relates to health insurance companies arbitrarily terminating coverage for sick people in times of need. According to insurance regulators and various private lawsuits concerning the activities of Blue Cross of California and other health insurance providers,

The suits accuse health plans of dumping sick policyholders without evidence that the consumers intentionally omitted information about their medical condition or history. They also accuse insurers of using applications that are vague and confusing by design, trapping consumers into making mistakes that can be used to cancel their coverage later.

California regulators, reviewing the actions of one particular insurance carrier, reached the following conclusion about Blue Cross:

The agency has concluded that the company systematically violated the law by improperly canceling policies and failing to verify medical information on applications before issuing coverage.

Apparently this systematic problem affects individuals and families everywhere. A health insurance company happily accepts your premiums and charges you late fees when your check arrives late. When you are sick and it comes time to actually needing your coverage, we need to ensure that your health insurance company acts appropriately and does not dump you because you have become a costly liability.

Apparently in California, the LA Times article suggests that Blue Cross set up a special department to review and consider cancelling health insurance policies of up to 1500 people per week:

But an employee said in a deposition last year that a special department considers as many as 1,500 cases for cancellation each week in California alone. A consumer lawyer who saw Blue Cross’ cancellation tally sheets described the department as a rescission factory.

Unfortunately, we have seen the same conduct in Arizona by health insurance carriers interested in escaping contractual obligations in order to maximize profits. I have no problems with insurance companies seeking to maximize profits. However, a company must be held accountable if the company’s efforts to earn a profit involve wrongfully taking away the contractual rights of a insured consumers. In my opinion, litigation and damage awards can give companies proper incentives to prevent a health insurance policy cancellation crisis. Health insurance companies must be held accountable when making improper decisions designed to minimize payouts and maximize profits. I believe that damage awards in the proper cases not only hold companies accountable to the aggrieved insured, but also plays a role in minimizing future risk of misconduct. What do you think?