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Aetna to outsource rulings

An independent panel of doctors will decide if customers' coverage should be rescinded in suspected fraud cases.

September 23, 2008|From Times Staff and Wire Reports

Aetna Inc., the third-largest U.S. health insurer, will let outside doctors decide whether to cancel coverage for sick customers suspected of obtaining policies through false or incomplete information.

The Hartford, Conn., company will give three-member physician panels the final say on rescinding individual and family policies starting today.

Aetna is the first of more than 1,300 insurers to set up binding outside reviews in every state where they do business, said California Insurance Department spokesman Darrel Ng.

The cancellation of policies after people developed costly illnesses such as cancer and heart disease became a national issue in 2006 because of incidents in California.

Stories in the Los Angeles Times over the last two years helped prompt state regulators to crack down on insurers through fines and orders to reinstate thousands of policies improperly canceled after patients ran up large bills.

State regulators have won more than $20 million in settlements over the practice from five insurers, including $10 million from WellPoint Inc. of Indianapolis. WellPoint agreed to reinstate 1,770 members. Congress opened an investigation in July.

"This issue has generated much public attention for our industry, and we want to address it head on," said Aetna Chief Executive Ron Williams, who often speaks out on health policy issues. "We want to go the extra mile when it comes to the tough decision of rescinding the few policies we must."

Aetna shares fell $2.76, or 7.2%, to $35.83. The stock has dropped 38% this year.

Insurers are supposed to check a customer's eligibility for coverage before issuing a policy, not after illness sets in, regulators said. In California, some companies did no investigating until claims for major illnesses started to be filed.

Such retroactive cancellations, known in the industry as rescissions, can saddle families with debts, interrupt treatment and leave consumers permanently uninsurable in the private market.

All insurers doing business in California eventually will be required to conduct independent reviews of cancellations, Ng said.

"This nationwide independent review process should give consumers enhanced peace of mind that they will always be treated fairly and have access to a process independent of Aetna," Williams said.

The insurance industry defends cancellations as necessary protection against fraud by those applying for coverage. Abuses skew the assessment of how risky and expensive it will be to cover someone and raise prices for honest customers, according to the insurers.

Consumers have said that confusing application forms used by some insurers elicited incomplete disclosures that could be used later to justify cancellations.

Aetna has hired independent review company MCMC of Boston to perform more than 40,000 reviews of medical bills and services each year.

Investigators in California have focused much of their attention on Health Net Inc. of Woodland Hills. On Sept. 12, the insurer settled a state probe by reinstating 926 sick customers, covering $14.2 million in medical bills and paying a $3.6-million fine.

Health Net paid a $1-million fine last year after California discovered it had been financially rewarding workers who found reasons to drop policyholders who had become ill. A judge in February ordered the company to pay $9.4 million to a hair stylist whose coverage was canceled while she was undergoing treatment for breast cancer.

The other companies that reached settlements are the PacifiCare unit of UnitedHealth Group Inc. of Minnetonka, Minn., the largest U.S. health insurer, and two nonprofit insurers, San Francisco-based Anthem Blue Shield of California and Kaiser Permanente of Oakland.

Aetna hasn't been embroiled in regulatory actions over rescissions because it is careful to investigate applications before granting coverage, said company spokesman Mohit Ghose.

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