Incredibly Stupid Carrier Trick? Maybe. [Updated & Bumped]

[Please scroll down for important update]

It would seem that WellPoint is eagerly looking forward to government intervention, if not outright control:

"They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators."

If true, this is not only incredibly short-sighted, but morally egregious.

But is this story true?

Certainly we've seen our share of Stupid Carrier Tricks, but we've also seen how the press routinely misses both the facts, and the point. There are a number of facts missing from the stories I've seen, starting with how many of these women had already been diagnosed with breast cancer before seeking coverage, and whether or not this was disclosed on their applications. It would also be helpful to know if there are other health issues involved which might have triggered rescission.

Unfortunately, a lot of this information is probably covered under HIPAA privacy rules, effectively gagging the carrier from coming to its own defense. But I didn't see anything in the news stories thus far which even hint that the reporter tried to ascertain whether or not there was more here than we're being told.

If, and it's a very big "if," WellPoint is simply casting these women off willy-nilly, then they deserve any and all consequences that come their way, and we'll proudly add this episode to our pantheon of the aforementioned Stupid Carrier Tricks.

At this point, however, that would be premature.

UPDATE: [NB: the original post was published on Friday, April 23rd] Well, that didn't take long. Turns out this is actually a "Stupid MSM Trick." Bob just alerted me to Reuter's correction, which pretty much undermines the entirety of the original story. To wit:

"Removes all references to Robin Beaton ... that the insurance company that canceled her policy was not a WellPoint subsidiary."

And:

"Technically, rescission was not the reason Reilling lost her health insurance ... Rather, it was canceled because she did not answer letters from her insurance company requesting information about her employment history."

"Technically." Kinda like saying "technically, Joe didn't rob the bank at all, but he was riding a bike." Unfortunately, the damage has been done to WellPoint's reputation (such as it might be); one can't "unring the bell."

Now, one may take issue with the idea that one's employment history should form the basis for a rescission (I certainly do), but this is a far, far cry from the sensational headline claiming that breast cancer patients are routinely kicked off their plans. But it's of a piece with these kinds of stories (as I mentioned in the original post): go with the sensational (but baseless) headline, paint a stark picture of dire straits, and hit "publish." So much for "professional journalism."

Stupid Admin Tricks

Well, why not? We've had Stupid Carrier and Stupid Client tricks, and now we have a new category.

So what brings this on?

One of my groups, which has been a client for almost 20 years, recently agreed with me that they should change from their generic co-pay plan to a high deductible plan coupled with an HRA (Health Reimbursement Arrangement). The primary benefits of this move were two-fold: the employer saved a great deal on the premium (one of those unfortunately-rare cases where the price differential was substantial), and could afford to generously fund the reimbursement account.

Regular IB readers know that we almost always redact the names of carriers when we discuss them. This is not so much for purposes of liability as it is that most carriers do stupid things, so that it is not really useful to identify which one in any given scenario. But what happened in this instance was so egregious that I feel compelled to actually name the entity involved.

The carrier we're using in this case owns an HRA administrative company, called Definity. Their offer is simple and attractive: if you write your case with the parent company, Definity will set up and administer your HRA for free. This can be significant: set-up fees alone can run into the hundreds of dollars, and on-going administrative services into the thousands.

Still, it is said that free advice is worth what you pay for it, and so appears to be the case with free HRA administrative services.

Of a Monday, I called the number I had, to get the ball rolling (arrange for paperwork and instructions to be sent to the client). But when I called the number I had been given (by the carrier), the "gentleman" who answered refused to identify either himself or his company. That was odd, so I asked if I had gotten the right number, was this Definity? Instead of answering this reasonably straight-forward question, he asked if I was a "member." Hunh?

So I asked again, had I connected with Definity. He replied that he couldn't tell me that (would he have had to kill me?) unless I confirmed that I was a member. I pointed out that he was being moronic, that all I wanted to know was whether or not I had dialed the correct number, and if this was indeed Definity. He refused to budge, so I asked for his supervisor. I was told that "Dan" was not going to be available to me, and I observed that this was idiotic. The "gentleman" objected to this characterization, and warned me that if I persisted, he would hang up. I replied "Too late!" and disconnected. Redialing the number, I was connected with a different person, who was apparently empowered to divulge the fact that this was, in fact, Definity, but that the number I had been given was for claims, not "sales," and that she couldn't connect me to that one.

At this point, it occurred to me that I had learned something quite valuable: if these folks were this incompetent when I'm trying to get a relatively simple plan set up, I can only imagine how poorly they would have managed the arrangement itself. Thankfully, I was able to save my client from such a fate by referring him to a local admin who charges a reasonable fee for his services. It's true: Definity's plan was free but, at that, it would have been far too expensive for my tastes.

Stupid Carrier Tricks # (What, 327?)

We’re a very small agency, in a little suburb of a modest-sized Midwest town, but we do provide health insurance for those of our employees who want (and/or need) it. For a number of reasons, we’ve stayed with the same carrier for more than a few years (NTTAWWT). Of course, we’ve changed configurations over those years; the most recent was selecting a slightly higher deductible and installing an HRA (Health Reimbursement Arrangement).

Our renewal came up recently, and we had to make some choices. On the one hand, we’re not dissatisfied with the coverage and overall service of this carrier (they’re no worse – and no better – than anyone else currently in this market), but the experience I’m about to relate certainly earns it a spot in our (not so) coveted Pantheon of Stupid Carriers:

Our current plan is no longer being offered, but was a fairly typical PPO. We had coupled it with the HRA. The carrier’s automatic renewal option (the plan we’d go on by default, unless we specified otherwise, and which we’ll call Option A) is attractive: a $2,000 deductible, then 100%. Office visits are on our own nickel, but count towards the deductible (something the present plan’s co-pays don’t do). There’s still a prescription drug (rx) card, but it would be subject to that $2,000 deductible, which is “non optimal.” On the other hand, the rate is some $700/month lower than a plan with benefits similar to our present one. That would enable us to bump up the HRA numbers to offset the increased out of pocket.

But the deductible/rx tie-in is a non-starter. So I asked if they had a plan that did everything this new one would, but with an rx card that’s “turned on” from the get-go (no deductible). Turns out they do (we’ll call it Option B), so I asked for a quote on that plan.

So far, so good.

So what’s so stupid?

Well, I get all the numbers, and see something very strange : for one thing, they included the numbers for the plan we don’t like (Option A), but the premium is now some $170/month lower than what my actual renewal, which I got from the carrier in the first place, says it costs. They also included the plan we did want (Option B; same as Option A, but the rx card has no deductible), and it’s even less! Now, I’m not usually one to look a gift horse in the mouth, but this is getting stupid: why would the “better” plan (Option B) cost less than the not-as-good one (Option A)? And why are the numbers for Option A now almost $200 a month less than what we were originally told?

But wait, there’s more! I noticed on the speadsheet the carrier sent that there were TWO versions of Option A (the plan we don’t like). They were absolutely identical in benefit structure, but had two different product numbers. Plus: one was almost $200 per month more than the other.

I’ve asked, and I gotten the following response from the carrier (BTW, I’ll give them credit: at least they did respond):

“Yes, the premium is typically higher on the [“better”] plans vs. the [“not as good”] due to the up-front [no deductible] drug card. I have seen a few cases come back where that is not the case but they are pretty rare.

Additionally the [two identical but for price plans] are priced differently primarily due to experience. The [one] series did not run as well as they anticipated which has caused them to receive a higher rate than the [other] series.”

Okay then.

I do this for a living, and am reasonably adept at it, and this blows even me over.

(Warning to those who will say “Well gee, Prof, all the more reason for a national plan, so we don’t have this kind of confusion.” Oh yeah? I’ve got three words for you: I. R. S.)

Stupid Carrier Tricks: Umpteenth Edition

Sometimes, it seems as if we could populate this blog exclusively with stories of the dumb things insurance companies do. Of course, we’d have to change its name, but still.

Our latest installment in this “series” comes from Anthem Blue Cross/Shield, which has notified those of us who sell their group plans of their newest requirement: when submitting a Request for Proposal, we must now include the Federal ID number (EIN) of the group in question. This is idiotic.

Why, you may ask?

Well for a number of reasons:

First, employers are no less subject to identity theft than indiviuals, but Anthem’s not requiring us to submit those when getting a quote [ed: Hush! Don’t give ‘em any ideas!]. (And, yes, most of us do quote individual products on our own PC’s, but not all agents have this ability)

Second, and IMHO, more egregious, is that this effectively shuts out competition. How so? Simple: if one is not the incumbent agent, how likely is it that a prospect (who may be a referral, or a cold call, or a friend of a friend) will be likely to part with that information simply to obtain a quote? More likely, they’ll just call their existing agent and avoid the bother.

Third, what possible reason would a carrier have to require this information simply to provide a quote? It’s just one more example of heavy handed tactics that occur when a carrier dominates a given market.

Stupid, stupid, stupid.

(There, I feel better already!)

UPDATE: It gets dumber [ed: this is possible?]. Since there's no way for Anthem to verify the abovementioned EIN, why wouldn't agents simply make one up for quoting purposes? What's the worst that could happen? "Here's a new, sold case. Oh, I accidentally included an incorrect EIN with the quote request? Gee, I'm sorry."

Stupid Carrier Tricks Numbers 236, 237, 238 . . .

From time to time we showcase carriers who do stupid things such as here and here (just to list a few). Seems we have been holding back and can't take it much longer.

So here are some new ones you may know.

Stupid carrier trick #236. Blue Cross of Georgia decides to roll out a new product. Actually, it isn't new but rather imported from their parent company in California. Seems Tonik has been a hot seller in California so now it is time to introduce young Georgian's to it.

On Monday 11/20/2006 an email goes out to all brokers announcing the new product and inviting brokers to the kick off & training session.

So what's the problem?

Monday, 11/20/2006 is 3 days before Thanksgiving.

The meeting is on Tuesday 11/21/2006.

Next comes Coventry with their new individual product. They have been active in the group market for some time (operating under various names) and decided to introduce a new individual major med product to Georgia. This plan is suppose to compete handily with the much entrenched Blue Cross plans. The new Coventry plans are almost a carbon copy of the Blue plans but with more bells & whistles and a lower price. They feature quick turn around in underwriting, fast issue . . . everything you would want.

The product is approved for sale for April 15th effective dates.

The kick off meeting is never officially announced to the brokers but by way of the grapevine I find out the kick off meeting is to be held on 4/19/2007 . . . four days after the product could officially be offered.

Despite a less than auspicious start the product has been well received. In fact, too well.

They have so many applications they cannot get the policies out the door until weeks after the effective date. Letters are sent out informing a client they are approved for coverage yet when those clients call customer service it seems the enrollment department has no record of the underwriting approval issued 3 weeks earlier.

Of course since enrollment has no record of the individual, no premiums have been drafted.

Nice.

Next comes Humana. (Might as well spread it around. No need to just limit it to one carrier.)

They roll out new products in Colorado and are well received. A few months later they are introduced to AZ, IL, MI, LA, OH & TX.

So how is the announcement handled?

With a write up in a business newspaper.

And the brokers?

Not a word . . .

In case you are wondering, most carriers get 85 - 90% of their new business from brokers.

Not direct to consumer advertising.

Not from home office captive agents.

From independent brokers.

Now comes one of my favorite carriers.

No, seriously.

Last year about 60% of the business I wrote went with United HealthCare (AKA Golden Rule).

They are a great company with very good customer service, competitive products and a strong network. Their forte' is the HDHP (high deductible health plan) coupled with a seamless HSA (health savings account).

UHC owns Exante Bank. When a client buys the health insurance from UHC and opts to let Exante handle the HSA they can also let UHC draft directly from the HSA to pay providers.

The way this works is neat.

You see your doc, give them your card, and when you leave you do not pay. The doc files the claim with UHC on your behalf. About 2 weeks later the claim is processed and adjudicated by UHC and the lower, negotiated rate structure is applied. UHC then drafts your HSA and pays the provider for you.

Seamless.

This system works so well that I asked UHC if they would be willing to do the same for their other high deductible plans that are not HSA compliant. What could be more simple? The carrier already has the ability to perform a service to their client, allowing them to access providers without making a payment at time of service.

Granted, the HSA is a tax qualified plan but you can also have a non-qualified HSA. All the same benefits EXCEPT the tax favored transactions.

UHC has the system in place to draft directly from Exante Bank accounts.

UHC owns Exante Bank.

Simple request, huh?

The response is . . . "UHC will not be introducing new products with this capability".

What new product?

Same product you have now. The only change is performing a CUSTOMER SERVICE by drafting from an account OWNED BY UHC, funded by the policyholder and paying the provider directly.

No dice.

This stupid carrier trick tops my list.

At least for now . . .

Puzzling Carrier Tricks

[Welcome Industry Radar readers!]

This one has me perplexed:

"An insurance company's "reprehensible" decision to rescind a South Carolina man's coverage after he tested positive for HIV warrants a $10 million punitive damage award ... Fortis investigated Mitchell's medical history and rescinded his policy, stating that Mitchell had misrepresented his HIV-positive status."

[ed: Fortis is now Assurant Health]

The court obviously found Fortis at fault here, and I'm not defending them (Lord knows we've documented a few Stupid Carrier Tricks over the years). It's just that I can see someone being HIV positive and not knowing it, and then having a claim, and so on (actually, that's how Magic Johnson found out he had AIDS: it showed up in the blood test when he applied for a new life insurance policy). So the carrier gets the claim, gets the medical records, and sees one of two things:

■ No history of blood issues, let alone HIV, so obviously not pre-ex (since that requires prior knowledge), so pay the claim. Rescission is so over the top that it's just hard to imagine even home office critters being that stupid.

■ The kid knew he had HIV, files the claim, and the rest is history. This would (should) result in a denial and rescission, but then one would think that would have been upheld by the courts. So which is it?

'Tis a poser.

[Hat Tip: Holly Robinson]

UPDATE: Thanks to co-blogger Bill Halper, we learn that Fortis really was that stupid; as Bill notes, "Fortis based the recission on an incorrectly dated note in the doctor's file and declined to correct the error after repeated attempts were made to point it out."

Stupid Politician Tricks

Continuing the "stupid trick" theme, it seems the folks in DC don't have a monopoly on stupidity. Apparently this affliction is contagious as there are signs it is spreading outward from Washington and infiltrating the 57 states.

First up, from the land of fruits and nuts, California Senator Noreen Evans has decided it should be illegal for a health insurance company to deny coverage to someone who is currently incurring a claim.

It seems the senator had recently learned that a woman who is already pregnant cannot purchase health insurance for the express purpose of paying for her claim that is already in progress. Just because Medicaid will cover a pregnant woman, Sen. Evans thinks health insurance companies should share in the joy.

Without coverage through work or on a partner's plan, expectant moms face paying exorbitant prices for necessary prenatal care and delivery procedures. The American Pregnancy Association (APA) estimates that the cost of delivery alone is $6,000-$8,000, and that's for a normal pregnancy. High-risk pregnancies and hospital stays can tack on thousands.

The $6000+ figure is certainly in line with what I have seen, but then at the other end of the spectrum a complicated birth can easily run in excess of $100,000 for delivery and post-natal care.

I had a client a few years ago that wisely purchased health insurance BEFORE she got pregnant and ran in to trouble in her third trimester. Her pregnancy triggered a life threatening blood disorder requiring multiple transfusions at $10,000 each. Total bill for her care, some of which was in ICU, was close to $160,000.

Her plan paid all but the deductible.

So how much does Sen. Evans think the premium should be if carriers were required to literally "buy" a claim of this magnitude?

The APA estimates that approximately 13 percent of women who become pregnant each year are not insured, often resulting in inadequate prenatal care, which can lead to complications for the mother and child.

Why should health insurance companies shoulder the burden for a lack of planning and responsibility on the part of the woman? What if all insurance worked this way?

You would then be able to buy insurance on your car AFTER it was stolen or your home AFTER it catches fire.

Heck, you could even buy life insurance AFTER you are dead.

Apparently Sen. Evans isn't the only nut in the Golden State, Assembly-person Fiona Ma thinks it is unconscionable that Medicare and health insurance companies should require patients to pay a percentage of the cost of their medication instead of a nominal copay.

Melanie Rowen, an MS (multiple sclerosis) patient uses a drug that costs $700 per month to help control her illness. According to the report, Ass. Ma thinks that is outrageous.

Her insurance classified it as a specialty tier drug, also known Tier 4. That means she pays 30 percent of the cost of the drug rather than a simple co-pay.

Oh if only everything in life could be a "simple copay".

Need 4 new tires?

Just a simple copay.

Need a new roof?

Just a simple copay.

So, how much additional premium should the insurance company be allowed to charge to cover drugs that can run a few hundred to several thousand per month? I have a very good friend with two daughters that have Gaucher's disease.

Their medication, when they can get it, is $2,000 per dose.

Some cancer medications run $5,000 per dose and more.

Specialty tier pricing started under Medicare Part D. Michelle Vogel is executive director of the Alliance for Plasma Therapies and has been tracking the impact.

"Whatever happens with Medicare typically follows in private insurance, so when I was looking at the private plans, and especially in California, you're seeing the majority of plans, have put in Tier 4 plans," said Vogel.

So Medicare is to blame for this, not the bad insurance companies. It's about time someone else took the heat.

Ma is proposing legislation in California to prevent health insurers from moving vital medications to Tier 4 status.

"What we're trying to do is make ensure that patients are able to afford the medication they need.

And in doing so is making sure health insurance premiums go even higher.

Where is the logic in that?

Copays are one of the main driving force in rising health insurance premiums. For the most part, the public has no idea how much health care really costs, nor do they care.

As long as they can see a doctor or fill a prescription for less than $50 what do they care?

And that is the problem that leads to increased utilization and higher total spending on health care.

If everything in life were a copay where would we be?

McDonald's and Burger King would go out of business while Ruth's Chris would flourish. Why would anyone eat at a burger joint when any meal was only a $15 copay?

Copay's make the consumer stupid. They have no idea how much things really cost and there is no incentive for them to learn or try to save money.

Right now, New York is the only state with a law preventing specialty tiers. Ma plans to announce the specifics of her legislation on Thursday. However, state legislation does not impact self-funded health plans which cover about half of all employees with health insurance. Federal legislation is needed to change that.

The author of this piece, and possibly the other players in this article, need to brief themselves on the provisions of a federal law called ERISA.

ERISA, a law that has been on the books for over 35 years, allows self funded health insurance plans to bypass state mandates on most provisions which in turn leads to lower premiums.

Just another stupid politician trick.

Stupid Agent Tricks: Annuity and Jail

First, let me be clear that the (unfortunate) victim of this story, (former) insurance agent Glenn Neasham, is not stupid. From all accounts, his conduct was appropriate and aboveboard; he appears to be the victim of a vindictive and over-zealous prosecutor.

The "stupid" folks here are my fellow agents, who could give lemmings a run for their money (straight off a cliff). Stephen Forman, an agent himself, sums it up nicely:

"Should I not be optimistic that our fellow producers wish to band together and help Glenn Neasham? At first blush, you'd think so. But my experience in this industry leads me to believe the cavalry may not be coming ... I was only too happy to sign the pledge at America Needs Agents ... just over 1,100 have signed the pledge out of 228,000 health agents"

[ed: I just learned about the pledge and signed it; the current total is 1,136]

He goes on to list other, similar efforts, all doomed to failure because agents just can't be bothered to actually step up.

Now, you may be thinking: Henry, surely these are anomalies - agents care about their livelihoods, after all.

I wish.

Let me share my own experience in a similar situation. About 10 years ago, a major carrier decided to change their commission structure from a percentage of premiums to a flat per member fee. Fair enough. But they went a step further, making this change retroactive, in clear violation of the agent's agreement.

About two dozen of us met at a local restaurant to compare notes and plan strategy. One colleague brought along an attorney friend who specialized in arbitration. We agreed that we would proceed, in accordance with the agent's agreement.

One of the hats I wear is Continuing Education instructor, primarily for folks who work in the health side of the business. In that capacity, I had a fairly large contact list of agents all around the state, folks who would be directly impacted by this. I offered up my list, and we sent out a mass mailing to about 300 or so fellow agents, asking them to join us in our fight.

We got back maybe a handful of replies. In fact, by the time we eventually settled with the carrier, there were exactly 8 of us (out of the original 24 plus the additional 300 from the mailing) left standing.

Mind you, joining us would have required zero financial contribution, nor did we ask for any time or effort. Just some words of support.

Cue the sounds of crickets chirping.

So it comes as no surprise to me that Mr Neasham is left to twist alone in the wind, nor that out of hundreds of thousands of agents, less than one half of one percent can even be bothered to click a link and supply an email address.

So who's worse, the prosecutor or us?

MLR is Stupid - Part II

Even more proof that MLR (Medical Loss Ratio) as mandated by Obamneycrap is stupid. The New York Dept of Insurance has decided that health insurance companies overcharged policyholders in 2010 and has ordered them to refund $114 million.

Empire’s refund payment to consumers was tallied at a little over $61 million. The other big New York player, UnitedHealthcare, has an affiliate (Oxford) involved in the refund.

Empire BlueCross BlueShield is New York’s largest insurer. In terms of overall membership, across business lines, the for-profit plan insures nearly 6 million New Yorkers. It is New York’s second largest insurer in the Small Group market, with about a 15% market share.

Empire Blue Cross, the states largest insurer is expected to refund a little over $61 million to some 6 million residents.

For those without a calculator, that works out to $10 per insured.

Seems like we need a new category.

Stupid MLR tricks.

Idiotic Carrier Tricks

[Welcome Industry Radar readers!]

So you may be asking "Henry, don't you mean Stupid Carrier Tricks?"

Sadly, no.

Regular readers may recall our piece on group insurance audits, wherein employers are required to verify that the folks on the plan are supposed to be, and that everyone that's supposed to be on the plan is [ed: clear as mud]. Early last week, one of my groups received such a request from its carrier, United Healthcare (UHC). They called me, and I helped them fill out the form. Once it was completed, they faxed it to me and I forwarded it on to our service rep. Total time involved: maybe 15 minutes, tops.

Later in the week, I received an email from the service rep: UHC wanted to know what the form was for, and why we'd sent it. Here is my response, copied directly from the "Sent" folder:

"UHC is run by idiots and/or morons. PLEASE feel free to forward that, BTW.

UHC sent this form to my client, who then complied by actually, um, completing and submitting the form as requested by the idiots/morons at UHC home office.

That help?"

My rep assured me that he'd take care of it (and I knew that he would: Don is exceptionally good at this, and really does make my job easier). He also said he'd delete my unsolicited review of UHC personnel (darn!). Well, at least I could put it away and move on.

Sure! This morning, I received a copy of a letter that UHC has sent my client, which starts with "Advanced Notification of Contract Cancellation Due To No Response And/Or Incomplete."

Let me get this straight: we get the form, we complete the form, we return the completed form, we're asked WHY we sent the completed form, and now we're facing cancellation because we didn't return the completed form?

So I called Don, and brought him up to speed. He asked me to email the letter and he'd get this resolved. So I did (and what did I title the pdf file? This: [client]_uhc_morons.pdf).

But you said tricks, Henry. Is there more?

Oh, indeed yes, dear reader:

Sometime around the last week of May, the owner of another of my groups called to tell me he would be turning 65 in June, and needed some advice. His spouse has some health issues, and we really need to keep her on the group, which we have with Anthem. He's continuing to work, so that's not a big problem. I explained to him that, since it's under 20 employees, Medicare is primary and so the group essentially becomes a Medicare Supplement plan.

"That's nice, Henry," he said, "but what's it gonna cost me?" Well, let's look at the renewal, which should have the MedSup rates in it.

Except it doesn't. So I request these rates. Three times in the past two and a half weeks. And until just a few minutes ago, I couldn't get them. The penultimate email read:

"I sincerely apologize for the delay in getting the Medicare rates to you. Enrollment/Billing was not able to pull them for me so I have to go back to underwriting to see if they can provide. I am hoping for a response from the underwriter today. I will let you know as soon as I get something back from her."

I received that about an hour ago, and replied:

"I guess it's comforting to know that UHC isn't the only company run by incomptent morons and idiots. Just not VERY comforting."

Five minutes ago (while I was composing this post), I received this wonderful news:

"The member that is turning 65 would pay the same rate as the active members. The renewal rates are based on the current census and since this member was not on Medicare at the time of the renewal, the Medicare rates will not apply until their next renewal."

Anyone else see the problem with that?

I'll keep you posted.

Stupid Broker Tricks©: WC Edition

Kevin Sullivan runs the Rucking Insurance blog, where he writes about insurance and rugby ("rucking" is a rugby term having to do with ball possession). Inspired by our continuing Stupid Agent Tricks© series, Kevin has the sordid story of what happens when an agent betrays his client's trust. Recommended.

Stupid Claims Rep Tricks

Over the years, our Stupid Carrier Tricks series has garnered quite a few eyeballs. The carriers, though, rely on individuals to carry out the work; in the P&C area, claims are generally handled by claims representatives (aka "adjusters"). Law-blogger (and longtime FoIB) Eric Turkewitz has a fascinating, frustrating post up about a weaselly Allstate Rep with a snarky attitude and faulty brain filter:

"A snarky email from an Allstate adjuster may cost the company $900,000 ... especially since the defendant had a problem with its expert."

Eric makes often complex legal issues easily understood, and you can't help but smile at his take on the adjuster.

Recommended.

Enrolling the Dead

Here at InsureBlog we try to put a positive spin on things as much as possible but have not shied away from exposing the dirty side of our industry. Most of the time the dark side has to do with carriers (Stupid Carrier Tricks) or providers (Stupid Doctor Tricks) but we have also been quick to chastise agents that have crossed the line.

It seems that some agents working in the 65+ market have found "creative" ways of generating sales . . . and commissions.

In documents provided to congress evidence is clearly present that suggests that insurance salesmen in 39 U.S. states used illegal or unethical tactics in order to get a signature on the dotted line. Furthermore they were willing to enroll the dead,mentally incompetent, use stolen private information attained from federal records and even impersonate Medicare representatives, to win over another unsuspecting consumer.

As if that were not enough, along comes this little gem.

It is estimated that 1 out of 5 Americans who are enrolled in Medicare are on one of the Medicare Advantage plans, and according to some experts these plans are costing the government more money than are the traditional Medicare plans.

Presumably the dead enrollees are not contributing to this shortfall . . .

Stupid Government Tricks

Life insurance proceeds are, with few exceptions, received free of any income tax. But that may change if the Oregon taxer's get their way.

"Oregonians who purchase life insurance and annuity products to assure the financial security of themselves and their loved ones would be hit with a tax that undermines their carefully-made financial protection, long-term savings and retirement income. H.B. 2854 would impose a tax on the life insurance benefits received by Oregon families suffering the death of a loved one. It would also impose a new tax on savings through life insurance and annuities.

Sorry your spouse died. Here is a check, less the state's cut. We need it more than you do.

Good public policy encourages financial security and self-reliance. This is especially so today when Oregon is facing 11 percent unemployment and struggling through a financial crisis that has drained the savings of so many of its citizens. Yet, H.B. 2854 goes in the opposite direction, taxing already beleaguered savings plans and penalizing families when they suffer a loss.

Is there no end to the money grabbing taxer's? Just one more example of stupid government tricks.

Stupid Client Tricks #3

OK, this probably should be Stupid Client Tricks #2, but in all fairness, Matt Horn (a frequent contributor) did tell us (in his comments) about something one of his clients did that definitely qualifies for SCT #2.

Last year a client asked to buy life insurance.

Now I should tell you that I do not sell life insurance, but I do respond when someone asks to buy.

That being said, I took his information, secured quotes from multiple carriers and made my recommendation.

From past experience I have learned to notify clients in advance that final rates on life insurance can vary widely depending on final lab results.

This was no different.

Long story short, I quoted a rate of $601. Once his lab results came back the carrier moved him from a preferred rating to standard due (primarily) to a highly elevated cholesterol reading (294).

The resulting premium increased to $1198.

He argued, saying the readings were off and wanted a recount (so to speak). I suggested he go to his doc and have the test repeated. If the new readings were significantly lower we can appeal.

He grumbled, gave me a check for the premium difference.

A few months later he asked me to look into health insurance for him as his COBRA was ending. (In reality, his wife was my client but he was involved in all the discussions for her coverage).

I asked about his cholesterol and what meds he was taking.

He told me his doc told him to change his diet and that would be enough.

However the health insurance carrier disagreed. They asked for doctor records only to discover his doc had told him to take a cholesterol lowering medication and come back for a check up in 3 months.

He failed to follow doctors orders and his application was denied.

Fast forward to yesterday.

He emailed me, complaining that his renewal life premium had doubled from $601 last year to $1198 this year.

Since it was a 15 year term policy this was impossible.

Also, I had copies of last years application, quote, initial premium, amendment rider and check for the additional premium. I sent all this to him and reminded him of the scenario.

I told him I would be glad to shop his plan again this year if his cholesterol was lower.

This morning I got his response.

"I want a new agent your fired. my did my premiums go from $601.00 to 1198 per year. was this a switch and bate."

Apparently his mind was made up so there was no need to confuse him with the facts.

Stupid Consumer Tricks

Regular readers are familiar with our "Stupid Carrier Tricks" series; a lesser-known version recounts those all-too-infrequent occasions where a carrier "gets it right." I'm very pleased to say that this is one of the latter.

In an email I received yesterday, Aetna says that it's finally had enough of agents and employers taking advantage of the low rates afforded to and by high deductible health plans. The point of these plans is to encourage and empower consumer participation in health care decisions, making more economically and medically efficient choices regarding health care. The problem is that some folks are "gaming" the system by wrapping these plans with substantial first-dollar benefits, thereby defeating the purpose, and diluting the net gain.

Okay, let's try that in English, instead of insure-speak:

By choosing a high deductible, "no frills" health insurance plan, consumers (whether that's an employer group or folks on individual policies) enjoy lower premiums. That's because the insurer doesn't have to adjudicate a lot of small, routine claims and can thus save money on administrative costs. It also encourages consumers to make conscious decisions about health care, because they now have "skin in the game." These premium savings help the consumer more easily absorb the occasional catastrophic claim, because they've sent less money to the insurance company.

A classic "win-win" scenario.

Except when it isn't:

Apparently, a number of employer (or group) plans have been providing first dollar coverage to their covered employees. So that if, for example, the plan has a $1500 deductible, the employer is ponying up $500 or $1000 of that on the employees' behalf (or reimbursing them when claims are made). Thus, the employee has little or no incentive to make careful health care decisions, since the lower-cost high deductible plan ends up working pretty much like the high-cost co-pay plan it replaced.

If this sounds like an HRA (Health Reimbursement Arrangement), you're not far off.

Aetna finally figured out that a lot of their insured groups were doing just that, and using the savings to subsidize the higher out-of-pocket, thereby defeating whatever cost savings the plan might have engendered. And they're putting the kibosh on it:

"In recent months, Aetna has seen an increase in "underlying" or "wrap-around" plans that have not been disclosed prior to premium quoting.

We define an underlying or wrap around plan as any plan that either partially or completely subsidizes any member cost sharing outside of a federally-qualified Health Reimbursement Account (HRA) or Health Savings Account (HSA). Member cost sharing includes but is not limited to co-pays, deductibles and/or member coinsurance balances. (Employee funded Flexible Spending Accounts are not considered underlying plans) .*" [emphasis in original]

The offending employers have been kicking in 50% - or more! - of the underlying deductible, which has resulted in adverse selection, reduced health care savings, and increased "trend" (one factor in rate increases). This in turn has led to tainted risk pools and reduced end-user (consumer) savings, and presumably higher than expected rate increases at renewal time.

So what, you may ask, do they propose to do about this?

Going forward, they'll be requiring employers to "attest that no such underlying plans are present and that they are not funding the deductible in excess of 50% annually whether through an HRA or HSA." It's a separate form that must accompany all applicable new group applications. The form will essentially require the employer to promise not to pay more than 50% of the plan deductible. And this new rule has teeth: if the employer lies on that form and ends up subsidizing in excess of that 50% cap, it faces "rate increases, non-renewal, or termination."

Which, of course, begs the question: how would they know?

And that's a great question. I called Aetna this morning, and was told that, much like Blanche DuBois, they'll be relying on the employers' honesty. In other words, that they'll drop a dime on themselves. Uh-hunh.

While it would be easy to dismiss this out of hand, I must admit that I don't know how they'd track this, either. One would think that patterns could be seen in offending groups' claims, but perhaps that's not yet feasible. It's a shame, really, because it unfairly affects those groups who do choose to play by the rules.

Stupid Industry Tricks

So, the life insurance industry runs a side-gig called "Life Happens" that's designed to ramp up awareness of the need for life insurance (d'unh). We've blogged about it a few times (here, for example) as a way to promote these efforts.

So today's email contained a neat little item from Illinois Mutual promoting a new campaign called "Insure Your Love," which is "an industry-wide event aimed at raising awareness around the importance of proper insurance planning."

You can read more about it here.

So far, so good.

I thought it'd be an especially good idea to see if there were any promotional materials (such as videos and the like) at the actual Life Happens website, so I popped on over.

The good news is that yes, there are such materials available. The bad stupid news is that the rocket surgeons in charge think it's a good idea to put all of the good stuff behind a paywall.

Hey dummies: no one is going to pay you for the privilege of promoting your agenda.

/Sheesh

Insurers Behaving (Very) Badly

I'd originally planned to post this as another in our "Stupid Carrier Tricks" series, but this strikes me as so egregious that the term "tricks" doesn't do it justice.

I still believe that most carriers follow the letter, if not the spirit, of the law when investigating and adjudicating claims. But I may have to rethink that position in light of this:

"During the private talks, church members confessed abortions, sexual orientation issues, drug addictions and other dark secrets.

No one knew the couple wasn't actually interested in joining the church. Instead, they were private investigators hoping two church members, Bill and Leandra Pitts, would spill something they could use to discredit the pair in an ongoing lawsuit over a traffic accident.

The private eyes even tape-recorded the sessions."

Turns out, the Pitts' were involved in an automobile accident, in which they were not at fault. They maxed out the at-fault driver's insurance, and apparently filed under their own underinsured motorists cover. Their own carrier, Progressive Northern Insurance Company (which, according to A M Best, is a subsidiary of "the" Progressive insurance folks) instigated this outrageous and morally indefensible action against their own insureds.

Words fail me.

Well, words appropriate for this family-friendly blog.

What these "investigators" were hoping to learn at a church-run encounter group escapes me, but they must have figured that their own ends justified this dastardly means.

It seems to me that Progressive owes the Pitts a public apology, and swift, unquestioning payment of their claim.

It's the very least they can do.

(H/T to Bill Montgomery, CIC)

(Extremely) Stupid Agent Tricks

[Welcome Industry Radar readers!]

We all do stupid things from time to time, but this one takes the proverbial cake:

"The insurance agency owner charged in the death of a state examiner initially consented to a search of his office and car but withdrew after police found areas on carpet and a computer cord that tested positive for blood."

Seems that the owner of Dilworth Insurance in Charlotte, NC was being investigated based on an "administrative complaint;" Sallie Rohrbach, the DOI investigator, went missing while conducting her investigation. At one point, "(e)ight armed law-enforcement investigators with the North Carolina Department of Insurance [joined] the search." Never heard of armed insurance investigators before (maybe that's a good thing).

Ms Rohrbach's funeral was this past Sunday. The 40-year-old agent, Michael Howell, has been charged with first-degree murder. The authorities believe that "her death is connected to her duties as an auditor."

Rest in Peace, Sallie.

[Hat Tip: IB reader Jeff Milne]

Outstanding Vendor Tricks: Dental edition

Over the years, we've detailed any number of really stupid vendor tricks; the list of terrific ones is, unfortunately, much shorter.

Well, that latter list just grew a little larger today, as Superior Dental Care joins that august group.

And why is that, you ask?

Well, because they are an absolute joy to work with. Case in point:

Recently, I was privileged to write a brand new small group (as in, they'd never had group health insurance before). A month or so later, they asked about adding voluntary dental ("voluntary" in this context means employee paid, no employer contribution). I don't do a lot of dental, but Superior Dental (SDC) is one of my two go-to's for it. Superior especially is a delight, because they just make things so easy. In this case, we were going for a March 1 effective date, and the employer emailed me the forms on February 27.

Except I never received that email. So I presumed that they had decided to either change their minds, or were opting for an April 1 start date. So last week I followed up to see if they were still interested. They replied "of course, we sent you the paperwork last week!"

Oy.

So I called our SDC rep to see if there was any chance we could still get that March 1 effective date, even though it was already the 7th. And the answer was "of course, just send us the forms right away and we'll get that done for you."

So I called the client and they re-sent the forms, which I dutifully forwarded to SDC.And this morning, I received confirmation that the plan was activated on March 1, and that ID cards would be on the way shortly.

Doesn't get any better than that.

Kudos to Superior Dental Care.