Healthcare Fines and Penalties of the Week

Last Updated Aug 1, 2008 1:52 PM EDT

Health Insurance You Can Believe InAnd you wonder why the healthcare business rates so low in public esteem. Some stories from just the past week or so:
That all sound pretty bad, and while some of these cases may reflect honest mistakes, on the whole they reflect the prevailing ethos that encourages insurers and healthcare providers to game the system whenever possible, even if it means getting caught and paying for it later. Because when it comes down to it, even the larger fines here aren't a huge deterrent for most large healthcare organizations.

A few weeks ago, FierceHealthcare's Anne Zieger made exactly that point following California's high-profile assault on insurer "rescission," the practice of cancelling insurance policies after a member gets sick and starts racking up big bills:
The thing is, just how much have these sanctions accomplished? Sure, some policyholders have gotten their coverage back, and the giants will be shelling out some cash, but just how effective a deterrent is this? After all, we're talking multi-billion-dollar players here, so $1 million is an inconvenience and $10 million a rounding error for folks. Even more significantly, the plans aren't being required to admit any wrongdoing, so legally, they would seem to be shielded from facing a flood of lawsuits related to their actions. (Attorneys, I'd be interested to hear your opinion on this.)

The bottom line here, I think, is that if officials want to stop health plans from making improper policy cancellations, they're going to have to make it unprofitable for them to do this. While fines sound good, they'll never be large enough to be more than a mosquito bite for healthplans with billions in revenue. So someone has to try a new approach. Perhaps laws changing what kind of underwriting criteria they could use would be in the ballpark?
  • David Hamilton On Twitter» On Facebook»

    David Hamilton is the assistant managing editor of CNET News. He has been writing and editing business and tech coverage for about two decades -- the majority of that at the Wall Street Journal in both Tokyo and San Francisco. He is a two-time winner of the Overseas Press Club award and has written for numerous magazines and blogs, including Slate, Science, VentureBeat, CBS Interactive's BNET, California Lawyer and the New Republic.

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