SiCKO "Hitman" Lee Einer Shares More Insurance Industry Secrets With HonestMedicine

Faux Health Insurance for the Self-Employed:
The Sham, The Scam, The Shame of It

By Lee Einer – SiCKO “Hitman”

NOTE: When I interviewed Lee Einer for Honest Medicine, I was so impressed by his directness, and his willingness to share with us the less-than-honorable things he was forced to do (to keep his jobs) on behalf of the insurance and healthcare companies he worked for for 20 years. After our interview, I asked Lee if he would be willing to write a series of columns for HonestMedicine.

He said he would.

This is the first in what will be an ongoing series. In order not to confuse readers, I will share the title of his next column after this one.

One of the great failures of our current American healthcare system is that it does not -- and cannot -- provide true health insurance to most self-employed Americans.

Why not?

The core concept of health insurance is shared risk, and this is what we have with employer group insurance. With employer groups, the insurance company is insuring not an individual, but rather, a group of individuals. The larger the group, the more predictable the risk the company is taking – with “risk” referring to the likely future healthcare costs of this particular group.

It is all a matter of statistics. So, if you have a pool of, say, 500 employees, you can reference the statistics that exist in actuarial tables on heart attacks, cancer, and other illnesses and conditions, and you can make certain predictions about the cost of insuring a particular employee group. For example, if statistics show that 3 people out of a hundred typically have heart attacks in any given year, you can project that, say, 15 individuals in your employee pool will have heart attacks this year. This number has a margin of error and the degree of certainty attached to it, as do all statistics. The larger the pool, the lower the margin of error and the higher the degree of certainty. Since larger groups have more predictable risk and lower margins of error, they are less expensive to insure.

If you are self-employed, however, you don't have access to employer group coverage. Instead, you will likely get individual coverage, and this means you are not sharing your risk with anybody. Consequently, if you stay healthy, you are a cash cow for your insurer: You pay them money and they pay out on nothing but routine physicals. (However, because most of these individual policies are so expensive, self-employed people will often choose a high deductible plan in order to save money. So, in this case, your physicals won’t really be covered either. They will be “applied to your deductible.”)

You won’t find out that your insurer doesn't pay out, until you submit a claim for  a potentially costly condition.  And if you become ill, 100 percent of your “risk pool of one” is ill and therefore a money-pit for your insurer.

The insurer, therefore, has limited options, if they are to maintain profitability on your policy. They can jack your rates through the ceiling when it comes time to renew your policy (typically either every six months or every year). Or, they can deny your claims as treatment of a pre-existing condition. Or they can find an inconsistency on your application for coverage, and use it as a pretext to either increase your rates retroactive to the beginning of your coverage, issue a rider excluding coverage for the health condition you have, or rescind your policy retroactive to the date of issuance.

The first tactic, substantial rate increases at renewal time, is automatic. Every time you renew your policy, your future risk is re-assessed based on your “experience,” i.e., your reported health history during the past coverage period. So if you developed a serious health condition and your policy is up for renewal, your premiums could increase several-fold, forcing you to drop your coverage.

Problem solved, from the insurance company's perspective.

The remaining tactics – which I described very briefly in SiCKO -- all flow from a practice known as retroactive underwriting, or underwriting on the back end.

When you apply for individual, non-group coverage, the application typically asks a number of questions about your health experience over the five years prior.

• Did you have medical advice, diagnosis, care or treatment for any condition of the digestive system?

• Did you have medical advice, diagnosis, care or treatment for any condition of the respiratory or cardiovascular systems?

• Did you have medical advice, diagnosis, care or treatment for any conditions of the breast?

• Did you have medical advice, diagnosis, care or treatment for any mental or emotional issue or condition?

And so on.

Based on your answers, and on the physical exam which accompanied your application, insurance underwriters assess your risk, and determine whether they will cover you, what rate they will charge you and whether any conditions will be excluded with a rider.

When your insurer gets a bill, either for a monetary amount exceeding a certain threshold, or for treatment of a condition which could conceivably have existed before you became insured – even if you didn’t know you had the condition -- your file is “pended” for medical investigation. While it is pended, nothing is paid out for the condition under investigation.

The fact that none of your healthcare providers are being paid during this time often solves the insurer's problems by itself: Since your file may be pended for months, your medical caregivers will send you to collections, and unless you are financially well-off, you will not have sufficient funds to both pay your caregivers and your premiums.

The goal of the medical investigation is to find evidence that something was not fully disclosed on your application for insurance, so the insurer may claim that had they known, they would not have insured you, or would have insured you at a much higher rate, or would have excluded coverage for the condition for which you are now being treated.

As I described in SICKO, this is the point at which the insurer will go after you “like it’s a murder case.” They will contact every medical provider they believe treated you, and will request medical records. They will contact every pharmacy which you are believed to have used, and request their records. They will go into your health history as far back as five years before you applied for coverage.

If they find anything -- ANYTHING -- which they determine that you did not fully disclose, and which could conceivably have been captured by the questions on your application, they have you.

Example: Did you have rectal itch, constipation, a belly-ache or heartburn four years ago? Did you tell your doctor?  If so, did you remember to disclose this seemingly trivial and forgettable fact fully on your application under “conditions affecting the digestive tract”? If not, the insurer could use this as a pretext to dump you, jack your rates beyond that which you are able to pay or exclude coverage for your present problem.

You will, at that point, have been screwed. Mission accomplished.

The American system of individual insurance for the self-employed is, in short, a cynical scam -- a way to sell people the illusion of health coverage, knowing that when they need it most, the illusion will evaporate and they will be left with nothing.

Isn't it time for a change?

♣ ♣ Be sure to read Lee's second article, "The Truth About Self-Funded Plans." You will be surprised to learn the truth about these plans, which are provided by some employers -- especially the fact that they are NOT really insurance!

Comments

[Steve Fallon]

This article is very misleading. In order to protect itself in malpractices suits, the health care industry has seen to it that case law provides that people who lack formal medical training are incapable of reaching medically valid conclusions. Insurance applications reflect this reality; people are only required to disclose conditions which have been diagnosed by a licensed physician. In the eyes of the law, a medical condition or symptom of a medical condition simply does not exist unless it has been diagnosed as having a pathologic cause.

This gentleman is clearly engaging in fear-mongering by spreading false infomation.

[Tara Hines]

Who can we turn to?
My cousin Sienna Zertuche has to get an umbilical cord blood stem cell transplant, they say it is her only hope for survival, and her insurance are refusing to pay! She has 2 types of Leukemia, and they found no bone marrow match in the entire bank, and her family. The transplant and a 4 month stay at The Mayo Clinic in Minnesota will cost over $500,000! Does anyone have any ideas as to who we should contact and what we can do? Thank you...Please check out website also, www.savesienna.org

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Mr. Fallon's comment claims "false information" is in the article, but his explanation of legalities and malpractice does nothing to rebut the alleged tactics of the insurers. For these legal protections to kick in, the people being treated as described in the article would need to employ a lawyer to fight the tactics insurers use. I think the insurers cover the spread by screwing enough people that don't engage lawyers to cover the costs of honoring policies for those that do.

[Barbara B]

I have so much to say but let just comment on the NJ single payer/small group situation. Here in NJ they regulated the industry in the 90s and made it illegal to charge premiums based on preexsisting conditions. Additionally, it is illegal to kick anyone off due to a major illness. Sounds good, right? Wrong. As a result all competition hit the road and only two major players remain. The premiums for my healthy family of three is nearly 800 a month with a 2,500 deductable PER PERSON plus high co-pays and very little outside of standard doc visits is covered. This past fall my husband and I decided to get some checkups from our dermatologists (we both had suspicious spots and he has a family history of melanoma) and he got a colonoscopy (39 years old with a serious family history on both sides). As a result, we have been slammed with charges and Horizon NJ refuses to pay for most of them. They are telling me that the contract that I have in my hand is different than the contract they have and that I don't have all the details of my benefits so, in fact, I DO owe money according to THEIR copy. This would never hold up in a court of law but who is going to hire a lawyer and pay court costs for a 2,300 grievance. No one, and they know it. There is a pervasive passive agressive approach to any custmer service claims call you make. 95% of the time, I am put on hold to be transfered and whoops, I get disconnected. When I call them out on a clear example of them not honoring the terms of the contract, they then claim that my doctor didn't file the claim correctly (this is after 5 previous calls on the same matter where I was just told "nope, it goes to your deductable" no mention of a clerical error those other times) and then they refuse to call my docotor for a correction, they tell me it is my job. When I ask then exactly what I'm supposed to tell him what to do, they won't give me any specifics because that's between him and myslef. Yeah, ok. Today I called and spoke with a supervisor after two disconnects and 20 mins on hold. She tried to claim that my correction *could* result in the hospital sending me higher bills after I get the benefit coming to me because "you see the higher number on your claim and then the lower number that we pay....?" She was tring to suggest that that number has to do with my deductable, when in fact the lower nember is just the contracted number agreed upon by the hospitial and Horizon BCBS and has NOTHING to do with my deductable. She was purposely vague and when that scare tactic didn't work, she tried to have me believe that the other half of the routine Dr's visit charge that they pay out after my 30 dollar copay goes toward my preventative care allowance. No it does not, I called her out on it and she tried to change the story again. Duck, jab, duck, jab. So why do I pay? Because I will be getting pregant this year and in the back of your head there is always the "what if." What if someone gets into an accident. gets ill? One injury and they could seize all our assets. Its psychological torture. I'm so frustrated, these premiums that buy us nothing but angry afternoons and more bills are killing us.
Anyway, just wanted to say that NJ regulated to prevent a lot of the horrors that are talked about here and it still is a mess, in fact, its worse. Regulation won't work. Medical care cannot be a for profit buisness, its just that simple. I'm a moderate, very conservative fiscally on many issues but not this one. Imagine if we privatized out fire depts or police depts? It would be considered crazy talk. Privatized healthcare is just as crazy. Human life in peril is not a for profit buisness. Nationalize it.

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[Bill S.]

The part about premiums being raised is misleading. Individuals cannot be singled out for a premium increase based on their own health experience. An insurer would have to ask for an increase on an entire class of covered individuals based on their collective experience. Depednding on the state, the insurance company would have to document the reasons for the increase and then wait for approval before implementing the increase.

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