13 things your health insurer doesn't want you to know
(Last updated June 11, 2004)
Since Hippocrates wrote "Do no harm," countless patients have put their trust in physicians who have taken his oath. But
somewhere along the line, medicine became a business — a $1.3 trillion a
year business, according to the United States government — run by insurance
companies that have taken no such oath.
Do you ever feel that when it comes to your health plan the deck is stacked
against you? That's because there are many things your health insurer doesn't
want you to know. Here are just 13 of them.
Health insurers don't deny care, they deny payment which usually
amounts to the same thing. Denying payment saves them money, but sometimes cause
patients' deaths. Sound outrageous? Consider the statement below. It's an
excerpt from the May 30, 1996, testimony given before the United States House of
Representatives by Dr. Linda Peeno, a former HMO medical director and medical
claims reviewer for Humana and Blue Cross and Blue Shield of Kentucky. Peeno is
now a medical-ethics consultant and managed care whistleblower.
"I wish to begin by making a public confession: In the spring of
1987, as a physician, I caused the death of a man. Although this was known to
many people, I have not been taken before any court of law or called to
account for this in any professional or public forum. In fact, just the
opposite occurred: I was "rewarded" for this. It bought me an improved
reputation in my job, and contributed to my advancement afterwards. Not only
did I demonstrate I could indeed do what was expected of me, I exemplified the
"good" company doctor: I saved a half million dollars!
Whether it was nonprofit or for-profit, whether it was a health plan or
hospital, I had a common task: using my medical expertise for the financial
benefit of the organization, often at great harm and potentially death, to some
patients. . . . I am the evidence that managed care is inherently unethical, in
the areas of both medicine and business. Had my experiences been the result of
merely local aberrations, I would not have had anything to do for the past six
years. On the contrary, I discovered that my experiences are standard practice
and quite ordinary for the managed care business."
But the Health Insurance Association of America (HIAA) says doctors are
"actually more likely to face financial incentives encouraging them to provide
high-quality care and high productivity rather than those that might be expected
to reduce the amount of care they provide."
Health insurers make their covered benefits as narrow as the market allows and
routinely redesign benefits to control their highest costs, according to Peeno.
They also use deceitful policy language to hide exclusions.
Some dental plans, for example, cover accidental injury to teeth. If you bite
down on a hard candy and your tooth partially crumbles, you believe the insurer
will pay to fix it. But when you submit your claim, it's denied weeks later.
That's when you discover the policy's "definition of terms" section states in
fine print: "Injury to the teeth while eating is not considered an accidental
The HIAA says that while health plans and insurance regulators make every effort
to ensure that insurance contracts are clear, "understanding them does require a
significant degree of effort" on the part of the consumer.
Health insurers use marketing that enhances the attractive elements of a plan,
but they don't disclose potential plan problems. Most group health insurance
members have no idea of their exact coverage limits or a plan's rules until they
received a benefit booklet after the open enrollment period.
Even then, the benefit booklets don't fully reflect the contract between the
members' employer and the health insurer. The seeds of some of the most common
claims problems are sown when employers purchase health insurance for their
employees, according to Maria K. Todd, president and CEO of HealthPro Consulting
Consortium Inc., a private managed care consulting firm in Aurora, CO. Todd says
most employers use health insurance brokers to whom they give a list of desired
benefits. The broker, in turn, identifies insurers that offer affordable plans
with those benefits. After the employer selects an insurer, the broker hands the
employer a contract to review and sign.
"But the average human resources director really isn't aware he or she is being
given a boilerplate contract that favors the health plan," Todd says. They may
not realize that every element of the plan is potentially negotiable, and that
they could hammer out improvements for the plan members.
According to the HIAA, "all the disclosure in the world won't help if people
don't take the time necessary to be careful shoppers." The association urges
"health insurance purchasers" (including consumers and insurance brokers for
employers) to make sure they know what they are buying before they make any
major health insurance purchase.
Did you ever try to switch primary care physicians within your plan's provider
network only to find out that many of the doctors named on the provider list are
not accepting new patients? Then you have fallen prey to a health insurer that
uses a "phantom network," a directory filled with doctors who are no longer with
the plan or who are not taking new patients. Health insurers leave the names on
the list to make it look as if they have a large number of available doctors.
HIAA says the problem is that printed booklets that list a plan's participating
doctors can quickly become out of date. Instead of relying on printed materials,
visit your plan's web site where there is usually a more up-to-date listing.
"Health plans are interested in serving their members in order to keep them —
not in antagonizing them," says HIAA.
You may be surprised one day when you fill your prescription and discover a pill
splitter inside the bag along with a bottle of larger-dose pills that you must
cut in half. Mandatory pill splitting has been condemned by the American Medical
Association (AMA), the American Society of Consultant Pharmacists (ASCP), and
the American Pharmaceutical Association (APhA) due to the health risks involved.
These include the chance that patients will divide the pills unevenly and wind
up taking incorrect doses or, because some suffer from cognitive impairments,
they may forget which pills shoul be split.
Six California Kaiser Permanente patients and one doctor formerly under contract
with the HMO are currently suing Kaiser for allegedly forcing its members to
split pills. The lawsuit alleges the pill-splitting practice allows Kaiser to
profit because smaller-dose versions of some prescription pills cost Kaiser
almost as much as larger-dose versions of the same pill.
Kaiser spokesperson Beverly Hayon calls the charges "bogus" and says that pill
splitting is purely voluntary and only encouraged for a handful of drugs — and
then only for those patients who would not be adversely affected by an imprecise
dose. "Kaiser does not have a mandatory pill-splitting policy," says Hayon. "No
way. No how."
It's legal in most cases for health insurers to place a lien on any third-party
settlement money you get from an auto insurer after an accident. This practice,
known as "subrogation," simply means "substituting one for another."
Health insurers are allowed to recoup the cost of your medical care from the
settlement you receive from the person who injured you. For example, if your
auto accident medical expenses total $5,000 and you win a $10,000 settlement,
your health insurer can take half — but only if its "rights of recovery" are
spelled out in your plan agreement or summary of benefits. There have been many
court cases over this practice, and the issues aren't clear-cut. You do have the
option of hiring an attorney (at your own expense) to fight your health
insurer's subrogation demands.
Although 46 states have prompt-pay laws, those laws apply only to "clean
claims," or claims submitted to them without any missing or wrong information.
The problem is, according to Peeno, health insurers create a maze of
payment-submission rules that guarantee there will be many "technical" denials
for missing information or failure to follow the convoluted claims-submission
Why do insurers drag their feet on paying claims? When you pay your insurance
premium, it is invested in interest-bearing accounts. An insurer delays your
claim payment until the interest in these accounts is sufficient to pay the
company's accumulated claims without cutting into its profit margin. Medical
ethicists such as Peeno say "growing" the money isn't a questionable business
practice, but the deliberate denial and/or slow payment of claims is. The
problem is widespread. For example, Texas Insurance Commissioner Jose Montemayor
slapped 17 health insurers with fines totaling $9.2 million for violating the
state's prompt-pay law and lawsuits have been filed across the country by
doctors charging slow payment of claims by health insurers.
The HIAA disputes Peeno's allegations: "Each time a claim has to be handled, the
administrative costs for that claim increase, and these increased costs would
quickly outweigh any benefit to be realized by 'growing' the money as alleged by
Do you know whose guidelines your health insurer follows when approving the
length of your hospital stay? Your doctor, right? Wrong. Your insurer is most
likely using guidelines developed by an actuarial consulting firm such as
Milliman & Robertson. The problem is: Many doctors complain that Milliman &
Robertson's recommended hospital stays are dangerously brief.
For example, Milliman & Robertson data state that the "target" hospital stay for
meningitis (an infection of the covering of the brain and the spinal cord) is
three days. Many physicians say this is outrageously short and that the average
length of hospital stay for meningitis is a week or more. The use of Milliman &
Robertson data to limit patients' care (and increase revenue) is just one of the
allegations brought forth in a lawsuit filed by the state medical associations
of California, Georgia, and Texas in U.S. District Court in Miami that accuses a
nine health plans (Aetna Inc. and its Prudential unit, CIGNA Corp., Coventry
Health Care Inc., Foundation Health Systems, Humana Inc., PacifiCare Health
Systems, United Health Group, and WellPoint Health Networks) of violating
federal racketeering laws.
The HIAA says that the Milliman & Robertson guidelines are adjusted on a
case-by-case basis depending upon the condition of the patient, and when
problems arise "it is often the result of doctors not adequately explaining the
special circumstances that make a longer stay necessary."
Even when you've followed all the HMO rules, you still sometimes end up with a
bill for out-of-network charges. But is it your responsibility to pay the
doctor's fee for an out-of-network radiologist who read your hospital X-ray
because no in-network radiologist was available? No, you most certainly do not.
A patient can select an in-network primary care physician and in-network
hospital. Other than that, you have no control of who else gets involved with
your care within the hospital setting.
If this happens to you, raise an uproar. Appeal the insurer's payment decision.
File an official complaint with your state insurance department. (The contact
information for your department is available by selecting the state in which you
live from the pull-down menu at the top of this page.) Ask the department to
investigate the insurer's tactics.
Your health insurance policy probably contains a clause stating you will not be
billed for emergency room services if those services are eligible under "The
Prudent Layperson Standard" for emergency room visits. These visits have been
defined as medical, maternity, or psychiatric emergencies that would lead a
"prudent layperson" (an average person) to believe that a serious medical
condition exists or the absence of immediate medical attention would result in a
threat to the person's life, limb, or sight. This includes situations where an
individual is in severe pain.
But in some health plans, conditions such as a broken hip are not classified as
conditions that require emergency care. They are classified as "urgent"
conditions and you must call your primary care physician to get authorization to
visit the emergency room.
"The devil is in the details," says Robert D. Finney, a former manager for
health-care cost containment at the Hewlett-Packard Co. and author of HMO
Hardball, a consumer self-help book. "HMOs hide the details in
incomprehensible self-serving contracts written by HMO lawyers to take advantage
of sick and disabled patients."
Would you shop at a grocery store where none of the merchandise had price
labels? Of course not, but many health insurers use a pricing practice known as
"UCR," which stands for "usual, customary, and reasonable," to determine how
much of a claim they will pay. As the name says, these charges are supposedly
the "going rate" health care providers in your area charge.
But a consumer can't get UCR prices to dispute a claim payment or to compare
plans. Even court orders have done little to force insurers to supply the
formulas that they say they use to devise UCR rates, claiming it's proprietary
(or secret) business information.
"Publishing this type of information would lead to providers gaming the system
to raise fees, thus eliminating any competitive market forces that may influence
providers' fees," according to the HIAA. "This would result in even higher costs
for health care services."
Every health plan has an internal grievance process, but insiders say many are
reluctant to let you know that many states have also implemented laws governing
external appeals that in certain cases give you the right to a review by an
independent board of qualified experts. If the appeal is determined in your
favor, your insurance company cannot deny your claim.
Additionally, insiders say few health insurers let you know that if you file a
grievance with your state insurance department, insurance regulators are bound
by law to investigate all consumer complaints that fall under their
jurisdiction. Insurers do not want you to file a complaint with the United
States Department of Labor, the agency that oversees health plans that are
governed by ERISA, the Employee Retirement Income Security Act. ERISA governs
self-insured health plans, meaning the employer assumes the risk for plan
According to the HIAA, the insurance industry voluntarily developed the external
review process (subjecting claims determinations made by a health plan to review
by external experts) in an effort to address the concerns of health plans,
consumers, and doctors regarding the appropriateness of experimental and
Although 46 states have prompt-pay laws, insurers still violate them flagrantly
enough to set off lawsuits and insurance department investigations that often
lead to fines. The majority of these are settled quietly. And then the cycle
Insiders say what health insurers really fear are the massive class action
lawsuits that ask the courts to force the insurers to repay all the money they
have gained from these practices.
HIAA says lawsuits threaten access to health care. "Lawsuits only serve to drive
up the cost of health insurance by channeling scarce health care dollars into
the pockets of trial lawyers and away from patient care."
Last updated June 11, 2004
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