NY State Senator Eric Schneiderman, Ian’s Law & the Insurance Company Two-Step

Dancing Satyr (second style) from the cubiculum next to Sala del Grande Dipinto in the Villa de Misteri (Pompeii)

Interesting conversation over at WNYC on The Brian Lehrer Show: New York State Senator Eric Schneiderman (D-Manhattan/Bronx) was interviewed about legislation he and State Senator Neil Breslin (D-Delmar; Insurance Committee Chair) recently introduced called “Ian’s Law.”

Ian’s Law is meant to combat an insurer practice whereby insurers attempt to rid themselves of costly policies through a two-step process which circumvents state laws which forbid insurers from dropping policy holders because of conditions which require costly care.

The Insurance Company Two-Step, How it Works

Because insurers are forbidden by NY State law to drop individuals because of costly care, the insurer merely drops an entire class or group of people and then re-offers policies to that group– but omits coverage in the newly “re-offered” policies for the specific kinds of care which the costly care individual needs, and the insurer had formerly paid for. So… if someone has a chronic condition, which requires say… regular or  continuous skilled nursing care, the insurer just drops the entire group, and then offers everyone in that group a policy that does not include regular or continuous skilled nursing care. Voila! Pretty much everyone except the person who needs the skilled nursing care accepts and “re-applies” and the problem is solved. Two steps, no violation of the law and no more having to pay for all that costly care.

The following comes from Sen. Schneiderman’s website and describes Ian’s law and the litigation which brought the practice to light.

The bill is named for Ian Pearl, a 37-year-old man with muscular dystrophy who lost his insurance when Guardian, acting under current New York law, terminated the entire class of policies in the State  that covered Ian and others. Mr. Pearl became ventilator-dependent in 1991 and relies on a skilled nursing benefit under his insurance policy to receive care that has kept him alive since he suffered respiratory arrest.

The Pearl family charged in court that Guardian terminated the entire class of policies in New York in order to get around the fact that New York law prohibits an insurance company from dropping the policy of an individual simply because he or she needs care. An internal document from the insurer, released as a result of a legal challenge, showed that company officials justified dropping the entire line of policies statewide in order to get rid of “the few dogs”, like Ian Pearl, who were filing claims. Guardian, which denies any wrongdoing, has since settled with the Pearl family and restored Ian’s coverage.

In the interview with Brian Lehrer Senator Schneiderman said that the practice is “actually not limited to one company or one individual” and that “the litigation that Mr. Pearl brought revealed internal documents showing that they [the Insurance Co.] actually were scanning through their list of expensive patients preparing what they called “hit lists” of people who they were really trying to find a way to get rid of.” As noted in the quote above, these expensive insureds were referred to as “dogs.”

And that, in a nutshell is for profit health insurance. But I think there may be a larger lesson here as well. In many ways, this practice is not very different than the design of  “wellness incentives” substituting for pre-existing condition discrimination and penalties, a topic we covered just a little while back:

It may also be useful to consider how, in practice, “incentives” have been utilized by employers in the marketplace. By engaging in a two-step process, an employer may rather easily render a “wellness incentive” into a preexisting condition premium.

The Washington Post reports that

Valeo, an auto parts supplier, four years ago raised the deductible on an employee health plan to $2,200 from $200 for individual coverage and to $4,400 from $400 for family coverage. Then it gave employees the opportunity to reduce the deductible to its starting point by not smoking and by meeting goals for blood pressure, cholesterol and body mass index, said Robert Wade, Valeo’s director of human resources for North America.

“If they don’t comply, they end up being penalized, if you will, but we refer to it as a Healthy Rewards program,” Wade said.

And the point is this–Insurers hire the best and brightest they can find, and almost any legislation or regulation meant to protect the public from unconscionable unfairness is just one smart executive and two steps away– maybe three– from being danced around.

Preexisting Conditions & Wellness Incentives: A Horse of a Different Color?

Vincent van Gogh (1899)

The Washington Post has an interesting article which covers an aspect of pending health reform legislation that hasn’t received much attention as of late: wellness incentives tied to premium rates. As I have noted on this blog before, Senators Harkin and Baucus were both as of late said to have been considering legislative provisions which would enable employers to both reward and punish employees who fail to meet certain health goals. In pending legislation (and its practical application) it would seem the line between reward and punish has begun to blur.

The WaPo article relates how provisions passed by the Senate finance and health committees could more than double the allowable insurance premium increases tied to various conditions–or more precisely, to employee medical evaluations which fail to meet proscribed guidelines regarding weight, glucose and cholesterol levels, and other biometrics in addition to smoking cessation. Read more