Health Insurance Insider: 'They Dump the Sick'
A former health insurance executive blows the whistle on his former industry.
June 24, 2009— -- Frustrated Americans have long complained that their insurance companies valued the all-mighty buck over their health care. Today, a retired insurance executive confirmed their suspicions, arguing that the industry that once employed him regularly rips off its policyholders.
"[T]hey confuse their customers and dump the sick, all so they can satisfy their Wall Street investors," former Cigna senior executive Wendell Potter said during a hearing on health insurance today before the Senate Committee on Commerce, Science, and Transportation.
Potter, who has more than 20 years of experience working in public relations for insurance companies Cigna and Humana, said companies routinely drop seriously ill policyholders so they can meet "Wall Street's relentless profit expectations."
"They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment," Potter said. "…(D)umping a small number of enrollees can have a big effect on the bottom line."
Small businesses, in particular, he said, have had trouble maintaining their employee health insurance coverage, he said.
"All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year's premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether," he said.
Potter also faulted insurance companies for being misleading both in advertising their policies to new customers and in communicating with existing policyholders.
More and more people, he said, are falling victim to "deceptive marketing practices" that encourage them to buy "what essentially is fake insurance," policies with high costs but surprisingly limited benefits.
Insurance companies continue to mislead consumers through "explanation of benefits" documents that note what payments the insurance company made and what's left for consumers to pay out of pocket, Potter said.
The documents, he said, are "notoriously incomprehensible."
"Insurers know that policyholders are so baffled by those notices they usually just ignore them or throw them away. And that's exactly the point," he said. "If they were more understandable, more consumers might realize that they are being ripped off."
Potter did have some kind words to share about his former employer, Cigna.
"I hope that I'm not coming across as someone who's critical of my former employer. I had a good career at Cigna and was well-compensated. I was there for 15 years and lasted 15 years," he said. "My comments are directed toward an industry that is really going in the wrong direction and taking this country in the wrong direction."
In a statement released this evening, Cigna said that it "strongly disagree(s) with the suggestion that, motivated by profits, the insurance industry has deliberately attempted to confuse or unfairly treat covered individuals."
The company said it has a team dedicated to help its policyholders understand their benefits and that it is advocating for improvements to the health care system, including mandated coverage for all.
The Senate also heard from Karen Pollitz, a research professor at the Georgetown University Health Policy Institute, and Nancy Metcalf, a senior program editor at Consumer Reports.
Pollitz said that insurance companies should provide more information about how coverage works so that consumers are better equipped to compare policies as they shop for coverage.
Metcalf spoke of how many Americans have mistakenly bought lower-cost insurance policies without realizing how little the policies actually cover.
"They were no match for insurance companies who know exactly how to design and market plans whose gaping holes don't become apparent until it's much, much too late," she said.
As Congress and the White House continue to work on health-care reform, health insurance companies have been subject to intense grilling by lawmakers during several hearings.
Last week, three insurance company executives testified before Congress on the issue of health insurance rescissions -- the cancellation of insurance policies -- for seriously ill policyholders.
A year-long investigation by a subcommittee of the House Committee on Energy and Commerce found that three major U.S. insurance companies, WellPoint Inc., Assurant Health and United HealthGroup, canceled nearly 19,800 customer policies between 2003 and 2007.
The companies argue that rescissions are relatively rare and are important in combatting insurance fraud.
"In 2008, WellPoint's affiliated health plans rescinded one-tenth of one percent of new individual market enrollment," WellPoint said in an e-mailed statement to ABCNews.com. "While rescissions impact a very small percentage of applicants for coverage it is important to protect the majority who are honest on their applications for coverage."
Insurance companies are, by law, allowed to rescind policies for customers who found to have purposely lied or omitted information from their policy applications. But some of the rescissions the subcommittee found were for seriously ill people who had simply made mistakes on their applications.