When Will Health Insurers Learn?

Horror stories are a staple of those who believe that universal health insurance, with strict parameters set up by the federal government, is the answer not only for the tens of millions with no coverage, but even for those fortunate enough to have a policy, yet who too often find themselves left up the creek by outrageous carrier misconduct. Exhibit A is the case of Patsy Bates, whose health insurer dumped her during breast cancer treatments, and who paid the price last month.

(For the full Feb. 25 story, check out the “Good Morning, America” site by clicking here.)

Ms. Bates saw her health coverage cancelled by Health Net over some technicalities on her application while she was in the middle of breast cancer chemotherapy, dumping her with $129,000 in unpaid medical bills, and forcing her to at least temporarily postpone her life-saving treatment.

But Ms. Bates did not fade away quietly. She fought back in arbitration–the only legal avenue open to her under her policy–convincing arbitor Sam Cianchetti, a retired Los Angeles County Superior Court judge, that the carrier not only broke state laws, but acted in bad faith as well.

As a result, she was awarded $9 million–with the bulk, $8.4 million, for punitive damages.

That might be a relative slap on the wrist for a carrier that size, but more important, the decision, resulting bad publicity and the potential for further suits now that the cat was out of the bag prompted Health Net to end its habit of canceling the policies of sick policyholders, thereby saving lives and heartache down the road.

Better yet, the Los Angeles Times reported that other carriers might be following Health Net's example–the good one, by not bailing out on sick insureds. (Click here to read the Times story.)

Other legal challenges of the carrier's cancellation policy are pending, according to the LA Times–including a potential class-action.

Judge Cianchetti called Health Net's actions “egregious,” because, according to GMA, the carrier was not only systematic, but downright enthusiastic about tossing sick customers overboard, offering bonuses for cancellations, and going so far as to set quotas in case certain staff members didn't have the stomach to act so callously.

Ms. Bates' lawyers argued that Health Net had saved more than $35 million by rescinding policyholders between 2002 and 2006, GMA reported.

The LA Times quoted California Insurance Commissioner Steve Poizner as hailing the decision. “Health insurers simply cannot hold out the promise of insurance for their consumers, and then snatch it away just when people need it most. That is illegal, immoral and will not be tolerated,” he said in the article.

Why is it that so many people and politicians want to tell private carriers to take a hike, and give government a bigger role in health insurance?

I don't recall the last time Medicare dumped a cancer patient out on the street. Indeed, even with Medicaid–the insurer of last resort for the destitute–a dear friend of mine suffering from AIDS-related complications received the best of care, all paid for by the government program, before he finally succumbed.

So, how did Ms. Bates manage to survive long enough to beat her former carrier in arbitration? GMA reports that she completed her cancer treatment through a state-funded program in California.

State-funded? Interesting.