American Medical Association Condemns Insurance 'Purging'

The American Medical Association said it took an important step today to protect the rights of patients and ensure they have access to health care.

At its annual policy-making meeting, the association voted to include in its health care agenda a policy against "purging," a practice that includes charging certain subscribers much higher premiums with no financial data to back up the need for such increases as a way to get them off the subscriber rolls. .

"Health plans charge fees for health insurance above what the actuaries say they should be charging with the intent to discourage or price certain people out of the market," said Dr. Steven Stack, a member of the AMA's board of trustees.

The AMA's policy on purging is just one part of what it calls a health insurer code of conduct to safeguard the rights of patients and physicians whenever they deal with insurance companies. It's also just one of about 200 policy proposals under consideration at its annual meeting.

Differing Opinions on Purging

The AMA said the purging practice came to its attention when former health insurance company executives testified before Congress.

One of those former executives, Wendell Potter, who was a vice president at Cigna, told ABC News that purging "absolutely" occurs.

"It is widespread, although I know of no studies that have been undertaken to determine just how widespread it is," Potter said.

A congressional committee headed by Rep. Bart Stupak, D-Michigan, and Rep. Henry Waxman, R-California, is investigating purging, a practice Potter said has saved insurance companies a lot of money.

"Purging accounts that have become less profitable because of higher-than-anticipated-medical-claim activity saves them millions of dollars," he said.

America's Health Insurance Plans, a national association representing more than 1,300 health insurance companies, emphatically denied that purging occurs.

"There isn't evidence to show it, because in every single state, health plans have to provide actuarial justification of increases in premiums," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans.

But according to a health economist, the magnitude of purging falls somewhere in between the two extremes.

"It's a serious problem for a relatively circumscribed group of people, and it happens far less often than people think," said Gail Wilensky, an economist and senior fellow at Project HOPE, an international health foundation.

Huge Costs for Small Businesses

Small businesses often fall victim to purging, because in many cases, their employees' medical claims are much greater than expected.

Small businesses that haven't yet been purged can still face exorbitant increases in health insurance premiums that force them to make major changes.

That's what happened with the Children's Homes of Iredell County, a nonprofit foster care agency in Statesville, North Carolina.

Brenda Speece, the agency's executive director, recently received word that the rates for the employees' health insurance premiums would increase by nearly 21 percent starting July 1.

"They said it was based on usage, but I didn't get any information about what the usage was," she said.

Because of the burden that steep health insurance increases would put on the agency's limited budget, the board of directors decided it was time to switch insurers, which would save the agency about $8,000 a year. It has been with its current insurer since 1995.

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