Health Insurers Sanctioned, Fined

It has not been a good few weeks for big US health insurance companies.  First was a report (e.g., per the Wall Street Journal) that three companies had been suspended from selling Medicare Advantage plans:

The U.S. government's Medicare program has ordered three health insurers--Universal American Corp. (UAM), Health Net Inc. (HNT) and Arcadian Health--to stop marketing to and enrolling new members in their Medicare Advantage health and prescription-drug plans, saying the companies violated regulations.

In particular,

Universal American was told to stop marketing to and enrolling people in its Medicare Advantage plans effective Dec. 5. The action doesn't affect current members or the enrolling of beneficiaries in the company's stand-alone Medicare prescription-drug plans.

Health Net had to suspend the marketing of and enrollment in its Medicare Advantage plans and stand-alone Medicare prescription-drug plans as of Friday, as the government said the company's conduct poses a 'serious threat' to enrollees. The sanction doesn't affect the status of current enrollees, however.

In a letter Friday to Theodore Carpenter, head of Universal American's Medicare Advantage business, the Centers for Medicare and Medicaid Services alleged the company has a 'longstanding pattern of prohibited marketing practices targeted to highly vulnerable populations in violation' of federal law and guidelines as well as contractual terms with CMS.

Universal American is a 'chronic poor performer' with respect to the regulations, according to CMS, which said the company's agents engaged in aggressive sales tactics and abusive behavior, and misled or confused beneficiaries or misrepresented the plan.

The agency's letter to Health Net government-programs executive Scott Kelly said the company's conduct 'poses a serious threat to the health and safety of its enrollees,' as a result of the company's 'intractable failure to provide its enrollees with prescription drug benefits in conformance" with laws, guidelines and contract terms.' CMS cited a 'history of non-compliance.'

Then, the state of California fined and ordered restitution from multiple companies, as reported by the San Francisco Chronicle:

State regulators Monday fined seven of California's largest health insurers nearly $5 million for systematically failing to pay doctors and hospitals fairly and on time.

The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the plans were paying on average about 80 percent of the claims correctly, far below the legal threshold of 95 percent.

'Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time,' said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states' health maintenance organizations, or HMOs.

In addition to the fines, the companies must pay the doctors and hospitals restitution that is expected to run into the "tens of millions of dollars," Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.

Failing to pay providers properly makes it tougher for them to survive in the struggling economy, Ehnes said. 'If providers are not paid, patient care and access suffer,' she said.

Regulators fined Anthem Blue Cross and Blue Shield of California $900,000 each. United/PacifiCare was fined $800,000 and Kaiser Foundation Health Plan and Health Net were both hit with fines of $750,000.


The fines for Cigna and Aetna were $450,000 and $300,000, respectively, for a total of $4.85 million.

Please note that some of these companies have become "frequent flyers" on the Health Care Renewal blog.  Anthem Blue Cross in California is a subsidiary of WellPoint. WellPoint, in particular, just appears again and again on Health Care renewal.  A list of all posts about that company is here, and see this post for a list of past ethical and management missteps.  Health Net appeared in both stories above, and appeared on Health Care Renewal here.  Posts on Aetna are here.

Having been writing for this blog now for several years, I am struck by how often the conduct of particular health care organizations has been discredited, without any discernible effect on the organization's leadership or course.  It is particularly striking how the attention paid and pay given to the leaders of some health care organizations contrasts with the public record of their organization's bad behavior.

In particular, contrast the long catalog of misbehavior by WellPoint, noted above, with the enormous earnings of the company's CEO (more than $13 million in 2009), and her status as a prominent speaker on health care policy (see post here). 

In the laissez faire, anything goes, wild, wild west economy of today, spearheaded by the financial service companies that lead us to the global economic collapse, it seems that ethical leadership counts for nothing.  This is bad when it applies to the leadership of financial services, whose bad leadership can cost us all a lot of money.  It is worse when it applies to health care, whose bad leadership can cost us our health and our lives.

As I have said ad infinitum, to really reform health care, we will need to get accountable, ethical, transparent leadership of health care organizations.

WellPoint: Don't Know Much About Computer Programming; Aetna: Don't Know Much About Mathematics

Big US based health care insurance companies have not been covering themselves in glory in the last week.

Aetna's Math Errors

First, there was the case of Aetna's mathematical prowess, e.g., as reported by the Los Angeles Times:

A second insurance company in California has killed plans for double-digit rate hikes for individual policyholders because of errors in its filing that would have inflated premiums, state regulators said Thursday.

Connecticut-based Aetna Inc. had sought an average 19% increase in rates for its 65,000 individual customers, but pulled back after multiple math errors in its paperwork were found by its own staff and by an independent consultant working for the state.

Aetna's decision follows a similar move by Anthem Blue Cross, which canceled a rate increase of as much as 39% for many of its 800,000 California policyholders in April after the state consultant found calculation errors in its filing with the California Insurance Department.

Of course, Aetna tried to minimize the story:

An Aetna spokeswoman said the company found 'a miscalculation not previously detected' when it conducted a third round of internal reviews.

'This was a simple human error,' said spokeswoman Anjanette Coplin, who did not elaborate.

However,

'There were multiple errors � in the way [Aetna] annualized premiums and in the compounding of the rate increase,' said state Insurance Department spokesman Darrel Ng.

Of course, somehow the errors all were in Aetna's favor:

Even with the new disclosure requirements, regulators have limited authority to block rate increases. They can do so only if insurers fail to spend at least 70% of their premiums on medical claims.

In Aetna's recent rate filing, the insurer said its plan met the 70% minimum. But once the errors were identified, medical-claim spending fell below the 70% requirement. The proposed rates were higher than they should have been, officials said.

WellPoint's Computer Errors

A few minutes ago, the Associated Press reported:

WellPoint Inc. has notified 470,000 individual insurance customers that medical records, credit card numbers and other sensitive information may have been exposed in the latest security breach of the health insurer's records.

The Indianapolis company said the problem stemmed from an online program customers can use to track the progress of their application for coverage. It was fixed in March.

Spokeswoman Cynthia Sanders said an outside vendor had upgraded the insurer's application tracker last October and told the insurer all security measures were back in place.

But a California customer discovered that she could call up confidential information of other customers by manipulating Web addresses used in the program. Customers use a Web site and password to track their applications.

Note that this security breach was potentially serious:

WellPoint's security breach doesn't crack the top 10 in terms of number of people who may have had information exposed, said Paul Stephens, the [Privacy Rights Clearinghouse]organization's director of policy and advocacy. Even so, he labeled the breach 'very serious' because it possibly involved both financial and medical information.

This is not the first time WellPoint's computers and software have violated the privacy of its applicants or customers:

Two years ago, WellPoint offered free credit monitoring after it said personal information for about 128,000 customers in several states had been exposed online. In 2006, backup computer tapes containing the personal information of 200,000 of its members were stolen from a Massachusetts vendor's office.

Summary

Of course, everyone makes mistakes.  However, one would expect that at least health insurance companies/ managed care organizations ought to be able to do the math necessary to support their rate proposals correctly, and keep their policy-holders' and applicants' personal information confidential.  These would seem to be fundamental competencies that such organizations ought to display.  Of course, one can find other examples of lack the lack of competency (and worse) displayed by both Aetna and WellPoint. 

Furthermore, anyone can make mistakes, but in the real world, those who preside over such mistake-prone enterprises often do not do too well.  However, in the bizarre world of large health care organizations, the executives who preside over the ongoing bumbling just make more and more money, under the pretense that their continuing brilliant leadership just leads to one triumph after another. 

As we noted here, WellPoint CEO Angela Braly's total compensation increased in 2009 to an outsized $13.1 million, with the executives just underneath her paid proportionately well.  Per its 2010 proxy statement, WellPoint's

Total Rewards compensation program is designed to attract, engage, motivate and retain a talented team of executive officers and to appropriately reward those executive officers for their contributions to our business and our members. We seek to accomplish this goal in a way that is closely aligned with the long-term interests of our shareholders and the expectations of our members and health care providers.

I suspect that WellPoint's members' expectations did not include the three computer security breaches noted above.

Similarly, according to its 2010 proxy statement, Aetna CEO Ronald A Williams' total compensation in 2009 was a mere $18,058,162. Other top executives made proportionate amounts, from more than $1 million to more than $12 million. The rationale underlying executive compensation includes:

We seek to implement a pay-for-performance philosophy by tying a significant portion of our executives� compensation to their achievement of financial and other goals that are linked to the Company�s business strategy and each executive�s contributions towards the achievement of those goals.

To me, avoiding mathematical errors in calculating policy premiums ought to be part of the company's goals linked to its business strategy.

An old rock song that starts with "don't know much about history," may have a certain charm.  Health insurance companies that cannot accurately calculate premiums or protect the confidentiality of policy-holders' computerized data has none. 

As long as "imperial CEOs" can continue to get extremely rich while presiding over incompetence and stupidity, if not worse (see here), we can expect the foolishness to continue.  Meanwhile, the foolishness drives up costs and drives down quality of health care for the poor suffering patients, let alone the physicians and other health care professionals who must deal with it.

To really reform health care, we need to provide incentives for competent, honest leadership, and make that leadership accountable for its shortcomings.