In May, 2002, Jerome Mitchell, a 17-year old college freshman from rural South Carolina, learned he had contracted HIV. The news, of course, was devastating, but Mitchell believed that he had one thing going for him: On his own initiative, in anticipation of his first year in college, he had purchased his own health insurance.
Shortly after his diagnosis, however, his insurance company, Fortis, revoked his policy.
Mitchell was told that without further treatment his HIV would become full-blown AIDS within a year or two and he would most likely die within two years after that.
So he hired an attorney - not because he wanted to sue anyone; on the contrary, the shy African-American teenager expected his insurance was canceled by mistake and would be reinstated once he set the company straight.
But Fortis, now known as Assurant Health, ignored his attorney’s letters, as they had earlier inquiries from a case worker at a local clinic who was helping him. So Mitchell sued.
In 2004, a jury in Florence County, South Carolina, ordered Assurant Health, part of Assurant Inc, to pay Mitchell $15 million for wrongly revoking his heath insurance policy. In September 2009, the South Carolina Supreme Court upheld the lower court’s verdict, although the court reduced the amount to be paid him to $10 million.
By winning the verdict against Fortis, Mitchell not only obtained a measure of justice for himself; he also helped expose wrongdoing on the part of Fortis that could have repercussions for the entire health insurance industry.
Previously undisclosed records from Mitchell’s case reveal that Fortis had a company policy of targeting policyholders with HIV. A computer program and algorithm targeted every policyholder recently diagnosed with HIV for an automatic fraud investigation, as the company searched for any pretext to revoke their policy. As was the case with Mitchell, their insurance policies often were canceled on erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators.
The revelations come at a time when President Barack Obama, in his frantic push to rescue the administration’s health care plan, has stepped up his criticism of insurers. The U.S. House of Representatives is expected to vote later this week on an overhaul of the health system, which Obama has said is essential to do away controversial and unpopular industry practices.
Insurance companies have long engaged in the practice of “rescission,” whereby they investigate policyholders shortly after they’ve been diagnosed with life-threatening illnesses. But government regulators and investigators who have overseen the actions of Assurant and other health insurance companies say it is unprecedented for a company to single out people with HIV.
In his previously undisclosed court ruling, the judge in the Mitchell case also criticized what he said were the company’s efforts to cover its tracks.
Assurant Health said that as a matter of policy it did not comment on individual customer claims.
“We disagree with certain of the court’s characterizations of Assurant Health’s policies and procedures in the Mitchell case,” it said in a statement provided by spokesman Peter Duckler, adding: “The case continues to progress through the appellate process.”
Much of the trial record of the Mitchell case is bound by a confidentiality order and not available to the public. But two orders written by the presiding judge, Michael G. Nettles, a state circuit judge for the 12th Judicial District of South Carolina, of Florence County, describe the case in detail. Judge Nettles wrote the orders in response to motions by Assurant that the jury’s verdict be set aside or reduced.
In the motions, Nettles not only strongly denied Fortis’ claims but condemned the corporation’s conduct.
“There was evidence that Fortis’ general counsel insisted years ago that members of the rescission committee not record the identity of the persons present and involved in the process of making a decision to rescind a Fortis health insurance policy,” Nettles wrote.
Elsewhere in his order, Nettles noted that there were no “minutes of actions, votes, or any business conducted during the rescission committee’s meeting.”
The South Carolina Supreme Court, in upholding the jury’s verdict in the case in a unanimous 5-0 opinion, said that it agreed with the lower court’s finding that Fortis destroyed records to hide the corporation’s misconduct. Supreme Court Chief Justice Jean Hoefer Toal wrote: “The lack of written rescission policies, the lack of information available regarding appealing rights or procedures, the separate policies for rescission documents” as well as the “omission” of other records regarding the decision to revoke Mitchell’s insurance, constituted “evidence that Fortis tried to conceal the actions it took in rescinding his policy.”
In affirming the trial verdict and Nettles’ order, Toal was as harsh in her criticism of the company as Judge Nettles had been. “We find ample support in the record that Fortis’ conduct was reprehensible,” she wrote. “Fortis demonstrated an indifference to Mitchell’s life and a reckless disregard to his health and safety.”
Fortis canceled Mitchell’s health insurance based on a single erroneous note from a nurse in his medical records that indicated that he might have been diagnosed prior to his obtaining his insurance policy. When the company’s investigators discovered the note, they ceased further review of Mitchell’s records for evidence to the contrary, including the records containing the doctor’s diagnosis.
Nettles also suggested that Fortis should have realized the date in the note was incorrect: “Not only did Fortis choose to rely on one false and unreliable snippet of information containing an erroneous date to the exclusion of other information which would have revealed that date to be erroneous, Fortis refused to conduct any further investigation even after it was on notice the evidence which aroused its suspicion to be false,” the judge noted.
Fortis “gambled” with Mitchell’s life, Nettles wrote.
Their motive, according to the judge, was obvious: “The court finds that Fortis wrongfully elevated its concerns for maximizing profits over the rights and interest of its customer.” In upholding Nettles’ verdict, the South Carolina Supreme Court similarly ruled that “Fortis was motivated to avoid the losses it would undoubtedly incur in supporting Mitchell’s costly medical condition.”
While declining to comment on specific cases, Assurant said in the statement: “All insurance companies have processes to review claims to ensure their accuracy, completeness and compliance with policy provisions and we evaluate all claims on an individual basis.”
CEO DEFENDED RESCISSION
On June 16, 2009, the House Energy and Commerce Committee, held a hearing on the practice of rescission by health insurance companies, and among the industry executives who testified was Don Hamm, the CEO and President of Assurant Health.
Hamm insisted before the committee that rescission was a necessary tool for Assurant and other health insurance companies to hold the cost of premiums down for other policyholders. Hamm asserted that rescission was “one of many protections supporting the affordability and viability of individual health insurance in the United States under our present system.”
He also suggested that those who had their policies rescinded by Assurant had attempted to intentionally mislead his company: “Unfortunately, there are times when we discover that an applicant did not provide complete or accurate medical information when we underwrote the risk,” Hamm said.
But state regulators, federal and congressional investigators, and consumer advocates say that in only a tiny percentage of cases of people who have had their health insurance canceled was there a legitimate reason.
A 2007 investigation by a California state regulatory agency, the California Department of Managed Health Care, bore this out. The DMHC randomly selected 90 instances in which Anthem Blue Cross of California, one of WellPoint’s largest subsidiaries, canceled the insurance of policy holders after diagnoses with costly or life-threatening illnesses to determine how many were legally justified.
The result: The agency concluded that Anthem Blue Cross lacked legal grounds for canceling policies in every single instance.
“In all 90 files, there was no evidence (that Blue Cross), before rescinding coverage, investigated or established that the applicant’s omission/misrepresentation was willful,” the DMHC report said.
The Fortis underwriter who recommended Mitchell’s policy be rescinded had her own doubts that it was correct to do so, according to records the company did produce at trial.
In a reference to the nurse’s note with the wrong date, the underwriter wrote to her superiors: “Technically, we do not have the results of the HIV test. This is the only entry in the medical records regarding HIV status. Is this sufficient?”
Relying on the note was dubious, Judge Nettles wrote, because it was included in records from 2002, when Mitchell was in fact diagnosed with HIV, and not in 2001, when he purchased his policy. “The chronological sequence of those records raises an inference that the date on the handwritten note may be erroneous,” he wrote.
Moreover, Nettles said, if Mitchell’s HIV diagnosis had been a year earlier, as the erroneous note said, Mitchell’s medical records would have shown other references to that diagnosis and treatment and he would have sought reimbursement for expenses related to them.
Sallie Phelan, an attorney who represented Mitchell, says her client was bewildered as to why his insurance was canceled - at first not even contemplating the possibility that there was anything improper going on: “We began representing Jerome when he was still just a boy, really,” she said. “He was just this sweet kid with all these drives and ambitions.”
Then Mitchell felt betrayed, Phelan says. “He had done everything he was supposed to. He went out and got insurance on his own, at 17. He was a trusting person, perhaps too trustful. And as they kept slamming doors in his face, he thought at first there was some misunderstanding. He couldn’t understand what was going on, because he is such an honest person himself. And when they accused him of lying, that was the most harmful to him. He didn’t understand why they were accusing them. He didn’t understand why people weren’t listening to him.”
Like other major health insurance companies, Fortis has a “rescission committee” that reviews recommendations to cancel a policyholder’s insurance. But in the case of Fortis, Nettles wrote, the committee rarely did more than “rubber stamp” already flawed recommendations.
“There were no rules, no minutes, no notes, and, in accordance with instructions from general counsel not even a record of who was present,” the judge wrote about the committee.
During the meeting in which Mitchell’s insurance was rescinded, “there were more than 40 other customers, whose cases appeared before the rescission committee for review in no more than one and one half to two hours, representing an average of three minutes or less per customer,” he wrote.
According to Nettles, Fortis concealed information through its document retention practice. The company’s “stated policy for the last nine years has been to microfilm and destroy all documents,” the judge said. “There was also evidence that documents and/or records regarding (Mitchell’s) policy were deleted; and that telephone logs and recordings contained key omissions.” Fortis also “shredded” documents, he said.
Regarding another piece of key evidence, the judge concluded that “a jury could easily infer that Fortis destroyed and/or concealed” crucial evidence.
Overall, Nettles asserted, a “pattern of secrecy and concealment by Fortis in this case ... supports a high award of punitive damages.”
After his insurance was canceled, a case worker with a social agency who works with HIV patients named Mary Wiggins worked tirelessly for Mitchell to find him medical care and to have Fortis reinstate his insurance. Despite deluging Fortis with records and information that should have led to a reversal of the decision, the insurance company simply ignored her. Wiggins found a local clinic that agreed to provide care for Mitchell, in the process very likely saving his life.
Eventually, Mitchell retained legal counsel to have his health insurance reinstated, but Fortis ignored them as well. It was only after the insurance company was sued - some 22 months after his HIV diagnosis - that Mitchell’s insurance was reinstated.
In his order, Nettles said Mitchell’s treatment was typical of how Fortis treated patients recently diagnosed with HIV and other life-threatening diseases.
“In addition to these acts towards (Mitchell) there was evidence that Fortis has for some time been making recommendations for rescission, and acting on those recommendations, without good-faith investigation conducted fairly and objectively ... Fortis pre-programmed its computer to recognize the billing codes for expensive health conditions, which triggers an automatic fraud investigation by its “Cost Containment” division whenever such a code is recognized.”
A federal investigator who has reviewed Assurant’s remaining records says that they showed that once a person with HIV was targeted with a fraud investigation, the company made a greater effort than usual to cancel the person’s insurance. Policies and medical records were scrutinized to a greater extent than others being scrutinized, he said.
The investigator, who spoke on condition of anonymity, said that the motive for focusing on people with HIV was simply the high cost of treating the illness: “We are talking a lifetime of therapy, a lifetime of care ... a lot of bills. Nowadays someone with HIV can live a normal life for decades. This was about money.”
No evidence has emerged that any other major American company purged policyholders simply because they had HIV. But an investigation this summer by the House Energy and Commerce Committee as well as earlier ones by state regulators in California, New York and Connecticut, found that thousands of vulnerable and seriously ill policyholders have had their coverage canceled by many of the nation’s largest insurance companies without any legal basis. The congressional committee found that three insurance companies alone saved at least $300 million over five years from rescission. One of those three companies was Assurant.
The committee estimated that Assurant alone profited by more than $150 million between 2003 and 2007 from rescission.
During his appearance on June 16 before the House Energy and Commerce Committee, Hamm, the CEO and President of Assurant, urged Congress to pass the new health care legislation, in part to prevent such practices.
“We can achieve the goal we share - providing health care coverage for all Americans,” Hamm said. “If a system can be created where coverage is available to everyone and all Americans are required to participate, the process we are addressing today, rescission becomes unnecessary.”
By Murray Waas