How WellPoint's bad behavior advances health care reform.

How to fix health policy.
May 10 2010 6:14 PM

Obama vs. WellPoint

How the insurance giant's bad behavior advances health reform.

Click here for a guide to following the health care reform story online.

No corporation can claim a more vital role in passing and starting to implement the health care reform law than WellPoint, which has a larger customer base (34 million) than any other health insurer in the United States. This is not to say that WellPoint supported health reform; quite the opposite. But as President Obama's May 8 radio address demonstrated not for the first time (text, audio), WellPoint is a uniquely maladroit corporate heavy. If it didn't exist, Obama might have had to invent it.

"[W]hen we found out that an insurance company was systematically dropping the coverage of women diagnosed with breast cancer," Obama said in the address, "my administration called on them to end this practice immediately." The company went unnamed, but it was WellPoint, and news of the practice was broken by Reuters in an April 22 news story by Murray Waas, an investigative reporter who also happens to be a cancer survivor. Waas reported that WellPoint

was using a computer algorithm that automatically targeted … every … policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.

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This prompted Health and Human Services Secretary Kathleen Sebelius to write WellPoint chief executive Angela Braly and pronounce herself "surprised and disappointed." This practice, Sebelius wrote, was "deplorable." Braly replied that it was she who was "disappointed" that both Sebelius and Waas would "grossly misrepresent" the policies of a corporate citizen in whose Indianapolis headquarters hung "a three-story pink ribbon." Braly referred Sebelius to a fact sheet stating that the computer software in question "is used to look at a series of diagnostic codes meant to capture conditions that applicants would likely have known about at the time they applied for coverage. We do not single out breast cancer or pregnancy."

In other words, WellPoint had a computer program able to identify multiple diseases it found especially conducive to rescission (the routine and disgraceful practice by which health insurers comb through the paperwork of seriously ill policyholders in search of some chicken-shit reason to nullify the policy). Why Braly thought this assertion might improve her company's image is hard to guess. When the smoke cleared, WellPoint had been maneuvered into volunteering to end such rescissions as of May 1, nearly five months ahead of the deadline imposed by the new health law (which prohibits rescissions except when the patient commits fraud or "makes an intentional misrepresentation of material fact"). United Healthcare quickly followed suit.

Remember February? Health care reform was dead, killed by the unexpected loss of Sen. Ted Kennedy's Massachusetts seat to an anti-reform Republican named Scott Brown. Then health reform came back to life. House Speaker Nancy Pelosi deserves a lot of the credit, along with Senate Majority Leader Harry Reid and, of course, the president. But don't discount WellPoint's assist. On Feb. 4, the Los Angeles Times reported that a WellPoint subsidiary was preparing to raise its premiums in California by up to 39 percent. Sebelius pounced on that, too. "As you know," she wrote the subsidiary's president, "your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone." Before the month was out, the investigations subcommittee of the House energy and commerce committee had called hearings (transcript, documents), at which Braly complained, "It is difficult to continue to have to raise rates." The White House, meanwhile, used WellPoint's apparent greed as a pretext to incorporate into a revived health reform bill a provision allowing the federal government to review and roll back excessive premium hikes. Later discarded, the price controls (which were somewhat impractical) gave Obama an opportunity to talk up the urgent need to get out-of-control health insurers in harness.

Then actuaries working under California Insurance Commissioner Steve Poizner, who is a candidate in the Republican gubernatorial primary, discovered that the WellPoint subsidiary had based its 39 percent rate hike (which required state approval) on faulty math, prompting Sebelius to pounce again. In a May 5 letter, she urged other state insurance commissioners to review rate increases proposed by other WellPoint subsidiaries to see whether they made "mistakes similar to those made in California." In his May 8 radio address, Obama suggested, inaccurately, that his administration had caught the WellPoint error, and he touted Sebelius's letter.

Once again, Braly was "disappointed." In a May 9 letter to the president, she pointed out that during 2009 WellPoint paid for the treatment of 200,000 breast cancer patients and rescinded insurance policies for only four breast cancer patients. In essence, her argument boiled down to: You never hear about the breast cancer patients we didn't cut off! Did I mention that Braly's compensation package jumped this year to $13.1 million, up from $8.7 million the year before? They can't possibly be paying that for her public relations skills.

E-mail Timothy Noah at chatterbox@slate.com.

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Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.

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