Under Fire for Health Insurance Rate Hikes, WellPoint Goes To Court to Defend Denial of Care

PHOTO A Californian man was told his insurance company refused to cover his life saving liver transplantABC News
Ephram Nehme was told his insurance company refused to cover his life saving liver transplant.

As its chief executive heads to Washington to face Congressional outrage over dramatic rate hikes, WellPoint is facing the accusation that it "put profits over people" in handling the claim of a California man who needed an urgent liver transplant.

The allegation was made on Monday during opening arguments of a trial targeting WellPoint and its subsidiary Anthem Blue Cross for denying an out-of-state liver transplant for Ephram Nehme, a San Fernando Valley businessman who says the insurer's denial forced him to pay $205,000 out-of-pocket to get the procedure that ultimately saved his life.

Consumer advocates have highlighted the Nehme case as an extreme example of what they say is a common tool used by health-insurance companies to minimize losses and increase profits – denying care by claiming certain procedures are not "medically necessary."

"Denials are a great way to have an individually-insured person pay you premiums for years but dare they get sick and need your insurance, you can selectively deny the most expensive surgeries," said Jerry Flanagan, healthcare advocate for Consumer Watchdog, a California-based group that advocates for health-insurance reform.

On Wednesday, WellPoint CEO Angela Braly will appear before the House Energy and Commerce Committee Wednesday to explain the company's decision to raise premium rates 39 percent for individual policy holders in California. President Obama has seized on the rate hikes to relaunch his health-insurance reform effort.

With WellPoint employees expected to take the witness stand in coming weeks, the trial promises to offer a rare glimpse at how the nation's largest for-profit health insurer determines whether a treatment is "medically necessary" at a time when the insurance giant is taking intense heat for raising premium rates on individual policyholders in California by as much 39 percent.

In the fall of 2006, Anthem Blue Cross authorized a transplant at UCLA for Nehme who needed a new liver after developing cirrhotic liver disease. Nehme says his doctor informed him that a transplant at UCLA would not be available in time and instructed him to put his name on a list at the Clarian Medical Center at Indiana University where the wait time was much shorter.

Documents filed in court show that a Blue Cross coordinator recommended approval of an out-of-network transplant due an "increased wait time in California," but the company medical director reviewing the case denied the out-of-state transplant on the grounds that it was not covered under his medical plan and deemed it "not medically necessary."

Fearing for his life, Nehme, a successful businessman, paid for the transplant himself.

"Going to Indiana was worth it," said Nehme. "I would have been dead by now, I would have been gone."

WellPoint denies any wrongdoing in handling Nehme's case. In a statement, the insurer said that Nehme "insisted on going to Clarian although he knew that the transplant would not be covered at his facility." Wellpoint's attorneys have argued that Nehme never presented Blue Cross with any documentation to demonstrate "life-threatening circumstances" that required him to go out-of-network.

Nehme's attorney, Scott Glovsky, told the jury on Monday that Blue Cross denied the request without reviewing his total case file and without speaking to Nehme's in-network transplant doctor.

"Insurance companies can always object that something is not medically necessary, but the industry standard is that when you make these kinds of denials you have to review all the pertinent data," said Flanagan.

The Nehme case is the latest in a string of court battles the health insurance giant is facing in California.

A judge ruled in December that the City Attorney of Los Angeles could move forward with discovery in a lawsuit accusing WellPoint of using deception and false advertising to enroll hundreds of thousands of members in individual policies while allegedly engaging in a scheme to investigate and retroactively cancel policies for members with costly medical conditions.

The complaint filed in Los Angeles Superior Court faults the insurer's enrollment application for what it calls "confusing and ambiguous" questions that it says act as a "trap" to increase the possibility that applicant will make mistakes and omissions which can be used later as a basis for revoking coverage after the policyholder becomes ill.

The practice – known as rescission or post-claims underwriting – has been scrutinized by state regulators and congressional investigators, and a restriction on the practice was a key provision in the healthcare reform legislation passed by the House and Senate last year.

WellPoint said in a statement that rescission is "very small percentage" of their business and defended the practice as "an important tool to combat fraud and abuse in the American health care system." WellPoint and other major health insurers have argued that any ban on rescission must be coupled with a mandate requiring all individuals to purchase health insurance which would guarantee that young, healthy people join and stay in the insurance pool.

On another legal front, WellPoint is defending a class-action lawsuit accusing the company of conspiring to use skewed data to underpay doctors' bills for "out-of-network" treatments. The lawsuit, filed by the American Medical Association and other physician groups last year, was sparked by an investigation by New York Attorney General Andrew Cuomo which found that WellPoint and other health insurers used a database provider that set artificially low reimbursement rates for out-of-network care, costs that were ultimately billed to the patient.

Flanagan says that the rate hikes, rescission, and denials based on medical necessity are all "tools of the trade" that the health insurance industry has increasingly employed over the last decade.

"Our health insurance system has evolved because of the increasing financial pressure and incentives on companies to increase profits, they are looking for new strategies to keep costs down," said Flanagan.

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