Fact-Checking the President on Health Insurance
His tales of abuse don't stand scrutiny.
By SCOTT HARRINGTON
In his speech to Congress last week, President Barack Obama attempted to sell a reform agenda by demonizing the private health-insurance industry, which many people love to hate. He opened the attack by asserting: "More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day."
Clearly, this should never happen to anyone who is in good standing with his insurance company and has abided by the terms of the policy. But the president's examples of people "dropped" by their insurance companies involve the rescission of policies based on misrepresentation or concealment of information in applications for coverage. Private health insurance cannot function if people buy insurance only after they become seriously ill, or if they knowingly conceal health conditions that might affect their policy.
Traditional practice, governed by decades of common law, statute and regulation is for insurers to rely in underwriting and pricing on the truthfulness of the information provided by applicants about their health, without conducting a costly investigation of each applicant's health history. Instead, companies engage in a certain degree of ex post auditing—conducting more detailed and costly reviews of a subset of applications following policy issue—including when expensive treatment is sought soon after a policy is issued.
This practice offers substantial cost savings and lower premiums compared to trying to verify every application before issuing a policy, or simply paying all claims, regardless of the accuracy and completeness of the applicant's disclosure. Some states restrict insurer rescission rights to instances where the misrepresented or concealed information is directly related to the illness that produced the claim. Most states do not.
To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."
That part was a lie.
Although the president has used this example previously, his conclusion is contradicted by the transcript of a June 16 hearing on industry practices before the Subcommittee of Oversight and Investigation of the House Committee on Energy and Commerce. The deceased's sister testified that the insurer reinstated her brother's coverage following intervention by the Illinois Attorney General's Office. She testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."
The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."
The woman's testimony at the June 16 hearing confirms that her surgery was delayed several months. It also suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.
These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).
20,000 policies rescinded over five years - out of millions of policies. This isn't the massive problem the left is claiming.
If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.
Later in his speech, the president used Alabama to buttress his call for a government insurer to enhance competition in health insurance. He asserted that 90% of the Alabama health-insurance market is controlled by one insurer, and that high market concentration "makes it easier for insurance companies to treat their customers badly—by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates."
In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.
Similarly, a Dec. 31, 2007, report by the Alabama Department of Insurance indicates that the insurer's ratio of medical-claim costs to premiums for the year was 92%, with an administrative expense ratio (including claims settlement expenses) of 7.5%. Its net income, including investment income, was equivalent to 2% of premiums in that year.
In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.
Responsible reform requires careful analysis of the underlying causes of problems in health insurance and informed debate over the benefits and costs of targeted remedies. The president's continued demonization of private health insurance in pursuit of his broad agenda of government expansion is inconsistent with that objective.
Careful analysis is not what the Obama-Pelosi team is offering. Instead insurance companies are denounced as evil on what turns out to be flimsy grounds, doctors are demonized for amputating limbs and ripping out tonsils willy-nilly for profit.
Mr. Harrington is professor of health-care management and insurance and risk management at the University of Pennsylvania's Wharton School and an adjunct scholar at the American Enterprise Institute.
How's that for a good establishment source of info? I guess that AEI relationship makes him a an evil rightwing fanatic.
online.wsj.com
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Jab at insurer goes too far?
HEALTH REFORM | Obama said Illinois man died because loss of coverage caused delay -- in fact, policy got reinstated, no proof wait was fatal
September 13, 2009
LYNN SWEET blogs.suntimes.com/sweet
Yes, the insurance company did cancel the man's insurance. However, the family appealed and got his coverage reinstated and he suffered no delay in treatment. Could he have overcome a government decision to end his treatment? Who would they have appeaeled to in that case?
WASHINGTON -- When President Obama addressed a joint session of Congress on Wednesday, he wanted to vividly convey heartbreaking stories of sick folks getting screwed by insurance companies to pressure lawmakers to pass health care reform legislation.
Obama wants to make it impossible for people to have their health insurance coverage denied or yanked because of pre-existing conditions. He is in a battle with Congress to crack down on the insurers.
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Otto Raddatz, who died in January, is shown with his wife, Marie, in an undated photo. A transplant extended his life, his sister says.
(Courtesy)
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Lynn Sweet
Obama talked about the case of a now-deceased Downers Grove man, Otto Raddatz. Raddatz suffered horrific treatment from his insurance company. His case illustrates Obama's larger point: Insurance companies shouldn't be able to trump up a flimsy pretext to cancel a policy of someone who is sick.
Fortis Insurance Co. deserves all the scorn Obama wants to send its way. The company canceled Raddatz's policy when he needed it the most, in chemotherapy for stage IV non-Hodgkins lymphoma, a form of cancer.
But the decision of the company was reversed and the insurer was forced to pay benefits because of the persistent efforts of his sister Peggy Raddatz, a LaGrange attorney. She found her way to Illinois Attorney General Lisa Madigan's Health Care Bureau and kept up the pressure. Otto Raddatz fought his insurance company in April 2005 and won. He died in January.
Obama senior adviser David Axelrod said Obama got "the essence" of the Raddatz story "exactly right," and "the point the president wanted to make and did make" was that "insurance companies look for excuses to rescind their coverage just when [a person] needs it the most. ... And that practice has got to stop."
Obama went too far, though, when he claimed in his speech that Raddatz died because the coverage was withdrawn. Here's what Obama said Wednesday:
"One man from Illinois lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about. They delayed his treatment, and he died because of it."
The last sentence of Obama's can't be supported. Obama speechwriters, I was told, got their information about Raddatz in a July 27 story in Slate about the health care crisis, which said -- incorrectly -- that a fight over benefits delayed treatment, "eliminated Raddatz's chances of recovery, and he died."
Though Obama did not identify Raddatz, a White House spokesman confirmed his identity.
Here's a timeline I put together on the Raddatz case, drawn from Peggy Raddatz's June 16 testimony before a House Energy and Commerce panel dealing with bad insurers and a narrative provided by Madigan's office:
••September 2004: Otto Raddatz, 59, was diagnosed with cancer and started chemotherapy.
••January 2005: Raddatz prepared for a stem cell transplant.
••April 15, 2005: Fortis canceled Raddatz's insurance. Fortis claimed Raddatz failed to disclose that a 2000 CT scan showed gallstones and an aneurysm. Peggy Raddatz said her brother was never told of those CT findings.
••April 25, 2005: Raddatz filed a complaint with Madigan's office.
He had been scheduled for stem cell transplant surgery in three weeks. A delay at this point threatened his life.
Madigan's office filed an appeal. It was rejected the same day.
Madigan's office built a better case and filed a second appeal. Fortis reinstated Raddatz's policy. Raddatz did receive the stem cell transplant. The AG closed the case on May 6, 2005.
••Jan. 6, 2009: Raddatz died. Peggy Raddatz testified in June that the transplant "was extremely successful. It extended his life approximately 3½ years."
Sun-Times reporter Cheryl V. Jackson talked to Peggy Raddatz on Wednesday night. She had no complaint with what Obama said: "The point is that my brother lost his insurance coverage when he was dying."
suntimes.com |
