Wendell Potter: Pennsylvania, I don't know. The two biggest ones in Pennsylvania are still non-profit. Or I think there are more than two; I think there are three-Independence, BlueCross and Highmark tried to merge and become a very huge company in Pennsylvania. That did not happen, it did not go through, which I think is a good thing because they would certainly have been much more of a monopoly than they are now. But they have not yet converted to a for-profit status.
Rob Kall: Yet, even these non-profits operate in many ways like for-profits, or they have for-profit elements or components or ways to make money and keep it aside. That's what I understand. Is that correct?
Wendell Potter: That is correct. Even if their main business entity has non-profit status legally, almost all of them operate some for-profit businesses that are separate from the other parts of the business. But, yeah, they have many for-profit components.
Rob Kall: And I understand that some of them have huge bank accounts with billions of dollars that they claim to be in case there's some kind of a catastrophic illness or something.
Wendell Potter: That's true. They call it a "surplus." The for-profit companies call it profit. So we're talking about a matter of semantics here, regardless of whether you're for-profit or non-profit, if you have billions of dollars over what you need to operate and to pay out in claims, that's a profit or a surplus, but we're talking about the same thing.
Rob Kall: And I understand, for example, Pennsylvania has somewhere around fifteen or eighteen billion dollars?
Wendell Potter: That's right. It's a huge amount of money and more than one would think that they would need to keep in reserve. And certainly more than they are legally required to keep.
Rob Kall: Okay. You talked in your testimony about a number of different problems with the health insurance industry. One of them is purging. What's that about?
Wendell Potter: Purging is something that the executives of the for-profit insurance companies talk to investors and the financial analysts who cover them, they talk to them fairly freely about this practice, but you'll certainly not see it in a press release or hear them talk about it very freely to newspaper reporters for that matter.
What that means, is that when a business customer of an insurance company...when the employees of that business file claims that are above what the insurance company's underwriters expected, then that will trigger a review, and very often and very likely when that business comes up for renewal, the underwriters will jack the premiums up so much, so high, that the business has no alternative but to drop the insurance for their employees. And it can sometimes take just one claim from one employee for this to happen.
Rob Kall: So, if one employee needs surgery or some ongoing chronic care that's going to get expensive, it could affect all of the employees for that business? Or do they force that business to drop that employee? Or, what?
Wendell Potter: No, everybody who's employed is affected, not just the person who is sick. Yeah...it could be any one of us who might come down with an illness or be in an accident that would require continuing care or some expensive care, and that's what they do, they drop people and they purge accounts when people get sick and need the insurance most.
Rob Kall: Now, the other thing that you describe is a little different than purging. You described how the insurance companies will accept premiums from people for a long time, whether from a company or an individual, and then if they start to get expensive, they'll look for an excuse to dump the insured and reject the claims.
Wendell Potter: That's right, and the term for that is "rescission." And what they do, and this is primarily in what's referred to in the individual market, when people buy their insurance outside of their employer...if they get sick, if they get injured and file a claim, then the insurer will take a real close look at the application that the person filed to see if there might be some possibility that some previous illness wasn't disclosed. And often people don't even know they have a pre-existing condition, which is what this is called; sometimes it could be something in a doctor's note and the doctor might not have mentioned it, or he might have forgotten. Someone who's my age, I'm in my 50's; I can't remember everything I went to the doctor for many years ago. So many people just simply forget or inadvertently leave out information.
Rob Kall: That could...destroy a person.
Wendell Potter: Oh, absolutely. And it does. Many, many, many times, you may have seen a statistic that well over half of the bankruptcies in this country are related in one way or another to high medical debt. And when you incur medical debt, or have a lot of extensive care, and you expect the insurance company to cover it because you've made a good faith effort, you've paid your premiums on time, sometimes for years and years and years, and when you need it most, they'll kick you out because they don't want to have sick people on the rolls.
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