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Are insurers to blame for rising costs?

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

The San Francisco Chronicle‘s Carolyn Lochhead and Victoria Colliver use the recent furor over insurer Anthem’s rate hikes to explore just how much of the blame for rising health care costs should be shouldered by insurers. The reporters find that, in the end, insurers are just another one of the cartels (others include device makers and providers) and operate inside the opaque world of medical pricing and snag hefty cuts for themselves. Lochead and Colliver put it thus:

While the Anthem case has raised a political storm, the underlying surge in costs gets far less scrutiny. But each sector of the health industry points fingers at the other for driving up prices, and all are raking in money.

Insurers blame hospitals and doctors, doctors blame insurers, and hospitals blame doctors and medical devicemakers in what academics call an inscrutable medical-industrial complex that rivals anything the defense industry ever invented. All these groups are combining into what many experts describe as cartels.

The reporters write that, despite their best efforts, they weren’t able to get many folks on the record. When they did find someone who was willing to talk, it was often a source we’ve seen before in other cost stories. It’s a tough theme to get quotes on, as nobody wants to burn bridges with their professional suppliers and everybody’s got some sort of skin in the game. They did, however, manage to find a local source who offered an original and illuminating anecdote:

Christina Bernstein, a medical-device engineer and independent sales representative based in San Francisco, sells disposable surgical tools made mostly out of plastic that she estimates are manufactured for about $40 each. These are marked up and sold to hospitals for as much as $350, she said, for a single use in a surgery on a patient.

“But if you were to get a detailed bill of what the hospital was charging the insurance company for the insured patient, those things get marked up to something like $1,200,” Bernstein said. “It’s ridiculous. There’s no open competition.”

(Hat tip to AHCJ Immediate Past President Trudy Lieberman, who wrote a column on CJR.org praising the Chronicle‘s story.)

Group tackles shady practices of Calif. insurers

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

In California Lawyer, Jeanette Borzo tells the story of how Los Angeles city attorneys and a private law firm teamed up to take on California insurance giants with allegations that the insurers are using intentionally obtuse forms to create excuses to rescind health coverage rather than pay for major claims.

Borzo reports that lawyer William Shernoff “argued that Blue Shield’s policy applications were designed to confuse, so that misstatements would provide an excuse for rescission should a policyholder ever require expensive treatment.” Shernoff wrote that “at a time when the policyholders are seriously ill, the insurance company walks away, leaving them uninsured, uninsurable and buried in debt.”

The lawsuits attracted the attention of California regulators and health providers alike. Doctors and hospitals, often stuck with the bills when coverage is rescinded for possibly bogus reasons, joined the class action against companies like Blue Cross of California.

“‘… it appears to have evolved into a cost-savings method,’ [Los Angeles Chief Assistant City Attorney Jeffrey] Isaacs says. ‘It’s a systematic, institutional process to flag and pull anything that looks costly to the company.’ Some insurers, he notes, even have a list of ‘rescission diagnostic codes’—a group of medical conditions that, when reported on claims, trigger an investigation into potential falsehoods on a policyholder’s application that might justify rescission.”

Three of California’s biggest insurers, Blue Cross, Blue Shield, and Health Net, have already been fined $18.3 million, but the attorneys and advocates continue to bring cases to court and push for legislative reforms.

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