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House Dems' Investigation Finds Big Increase in Health Insurance Denials

By Jane Norman, CQ HealthBeat Associate Editor

October 12, 2010 -- An investigation by House Democrats released Tuesday found a 49 percent spike in the number of people with pre-existing conditions who were denied health insurance coverage by four big insurers in the individual market between 2007 and 2009.

That denial rate came even as applications for individual policies to the four companies increased by just 16 percent during that same period, the investigation by the Energy and Commerce Committee found. The four insurers—Aetna, Humana, UnitedHealth Group and WellPoint—turned down more than 651,000 applicants during those two years due to their medical histories, or one out of every seven applicants, the investigation determined.

The inquiry began prior to enactment of the new health care law earlier this year, and it was released as Democrats and the Obama administration in advance of the midterm elections try to capitalize on the new benefits in the law (PL 111-148, PL 111-152) in the face of lukewarm public acceptance. Provisions cracking down on insurance company practices are among the most popular pieces of the law, even among some Republicans.

A report from Democrats Henry A. Waxman of California and Bart Stupak of Michigan on the investigation says that the new law will "significantly reform" insurance company denials of insurance to sick people that likely "would continue unabated in the absence of federal health reform legislation." That's because the law includes a ban on such denials for adults beginning in 2014. For children, the ban started for new policies issued after Sept. 23.

Waxman, the chairman of the committee, and Stupak, chairman of the oversight and investigations subcommittee, said they wrote to the four insurers on March 2 seeking information about coverage and claim denials and asked for internal communications, including e-mails to or from senior corporate managers. The companies, which covered about 2.8 million enrollees in the individual market in 2009, provided the committee with 68,000 pages of documents.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans (AHIP), which represents the industry. said in an emailed statement that health plans are committed to providing the most affordable coverage possible to people who rely on the individual market. Applicants undergo an underwriting process in which pre-existing conditions are disclosed, because if they defer buying insurance until after they need medical care, the cost of premiums will be driven up, he said.

Zirkelbach said insurers have recognized the problems that sick people have obtaining policies and that's why during the debate over the law they proposed changes to end exclusions based on pre-existing conditions, health status and gender. It's also key that the law includes an individual mandate so healthy people also buy insurance.

"There is broad agreement among policymakers and health care stakeholders that for market reforms to work, everyone needs to have health care coverage," he added.

Mohit M. Ghose, a spokesman for Aetna, said that the investigation showed what insurers have known for years—that the individual market needs change to improve access for all consumers.

"We must recognize, however, that improving access without also addressing the underlying issue of rising medical costs will lead to higher premiums for many consumers," said Ghose. "Consumers want more affordable insurance options, and we will continue to work for payment and regulatory reforms that will help address the cost drivers of premium increases."

The insurers' denials of coverage were to people in the individual market, which serves those who don't have group plans through employers or qualify for government programs such as Medicaid or Medicare. While the individual market is much smaller than the group market, there were 15.7 million people in 2008 who bought individual policies, the report noted.

The Democratic investigation also found that companies would turn down some insurance applicants without a review if the applicants disclosed certain medical conditions. According to an internal 2006 memo cited by the report, at one unnamed insurer those conditions included anyone who was a candidate for surgery, any woman who was currently pregnant or treated for infertility during the past five years and any applicant with a body mass index (BMI) of 39 or higher. Men or women with a BMI of 30 or higher are deemed obese.

Denials of insurance by the four companies climbed from 172,400 in 2007 to 221,400 in 2008 to 257,100 in 2009, the report said. "The actual number of coverage denials is likely to be significantly higher than reported," the report said, because it doesn't include sick people discouraged by insurance brokers from applying at all. Also, one company provided information to the committee from only one subsidiary.

Zeroing in on maternity care, the report found that pregnant women, expectant fathers and people trying to adopt children are "generally unable to obtain health insurance in the individual market," an issue that has been explored in the past in congressional hearings.

Maternity care is often excluded from policies, maternity benefits are limited and health insurance company executives developed business plans to reduce their maternity coverage, the report said. At one unnamed company, in a presentation to senior staff, executives identified maternity coverage as resulting "in higher prices, lower margins and loss of market share," the report said.

Another unnamed company kept a list of 425 medical diagnoses used to deny coverage including angina, diabetes and heart disease, the report said.

Those with health problems who did get insurance found deductibles increased for their conditions or riders attached to policies excluding coverage for these illnesses. One company did this with about 15 percent of its customers in the individual market, most often for Caesarean sections, back disorders, psychiatric disorders and outpatient treatment for high cholesterol, the report said. The report said that the four insurers turned down, in all, 212,800 claims for medical treatment in 2007 through 2009.

Business plans were formulated to use pre-existing conditions to limit claim payment, the report said. In addition, executives were considering expanding that practice by, for example, denying payments for prescription drugs used for pre-existing conditions, the report said.

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