The Doctor Weighs In

Brian Klepper

I’ve filled a lot of airtime and column inches over the last couple years talking about the financial conflicts that characterize so much of health care. I’ve focused on topics like oncology drug rebates, Medicare D drug plan scams and unnecessary care by doctors and hospitals, but the truth is that these unethical and abusive practices abound in virtually every area of health care.

These outrages are often glossed over because they’re perpetrated by respectable people presumably working under the mantle of a higher mission. Of course many health care professionals are mortified by these practices and know that the system must change. I recently did a video commentary on financially conflicted care on Medscape and expected a physician backlash. What arrived instead was a large number of supportive letters from doctors chagrined by medicine’s diminished ethical values, and more letters from patients who said my comments validated their experiences.

Over at The Health Care Blog, Matthew Holt has spotlighted a nauseatingly shocking story about Mega Life and Health, a case that deserves as much visibility as we can give it. Mega is one of several insurance companies poised to exploit the erosion of group coverage through the relatively less-watched individual coverage market. It sends freshly recruited insurance sales people, often with little training in or understanding of insurance, door-to-door in middle and low-income neighborhoods. They sell policies that have high deductibles and severe restrictions on the amounts they will pay out.

Mega has a front organization, the (presumably not-for-profit) National Association for the Self-Employed (NASE), which is, of course, set up to sound like a trade association. The Mega sales people apparently tell prospects that they can get a better deal on their insurance by joining NASE – a strength-in-numbers argument – so the focus ends up being on NASE’s benefits rather than the details of the coverage. It’s a simple deception, but it seems to work.

One former Mega salesperson, Jay Norris, posted a comment about his experience on his blog. He and I spoke, and he gave me permission to reprint that comment here.

I started out in the health insurance business with MEGA. I watched how all the successful agents sold policies, and that was by not mentioning what all wasn’t covered. They just made it sound like a simple plan with a co-pay, deductible, and 80/20 coinsurance. That’s the only way somebody would spend so much money on a policy that doesn’t cover anything, if the agent lied to them.

Once I understood what I was selling, I had to quit and become an independent broker.

If the agent explained to these people what they were buying, there is no possible way they would have bought it.

An article that appeared in the Mobile Register in March 2007 quotes former Mega sales staff who echo the same sentiments.  And after Matthew posted his article a couple days ago, another former Mega sales staffer commented on his site:

I barely made it through Mega Life training about 5 months ago, but quit before going on my first appointment. They taught us to deceive clients during training by saying to focus on the NASE benefits and not the health insurance.

While selling Mega insurance may have caused a crisis of conscience for some of its sales staff, buying it appears to have been catastrophic for customers who had serious claims.

The July 21, 2007 edition of the Southwest Florida Herald Tribune reports a case of an electrician, Tom Main, who purchased a Mega family policy 18 months ago. Soon afterward, his son was diagnosed with cancer, and the policy paid only about $45,000 of $500,000 in bills before Mega dropped the Main’s coverage. (Mega Health's website now promotes their coverage as having a $1 million lifetime benefit per injury or illness, and a $5 million benefit for all injuries and illnesses.)

The family claims they thought they were buying a high deductible plan that would cover the majority of their bills, but the company responded that Mr. Main knew what he was buying. Donna Ledbetter, a company spokesperson emailed the reporter that Mr. Main

“understood the policy and at no point expressed that he had been told anything different about the policy by the agent who sold the policy, or express dissatisfaction with his coverage and benefit selections."

Spend 10 minutes on the Web and you discover that the Main family is not an isolated case. A 2005 Business Week story reports that the National Association of Insurance Commissioners (NAIC) provided information showing that Mega has been the subject of 14 state insurance regulatory investigations since 1995, and that its 2005 complaint rate was more than twice the national average, though down from more than four times the national average in 2003.

Now comes the interesting part, and here Matthew Holt deserves the credit for looking more deeply into the circumstances.

It is tempting to dismiss sleazy cases like this as the work of just another fly-by-night outfit taking advantage of the ignorant and unwary. But as Matthew points out, Mega is a subsidiary of HealthMarkets, which in turn is owned by three prominent investment banks: The Blackstone Group, Goldman Sachs and DLJ Merchant Banking Partners.

In fairness, Blackstone acquired Mega relatively recently, on September 15, 2005. Even so, if it was determined to clean up Mega’s business practices, that is not evident in the case described in the Southwest Florida Herald Tribune.

Nor is a change in Mega's tactics demonstrated in very recent customer complaints and former sales staff testimonials. In a March 28, 2007 interview, California insurance attorney Bob Scott said,

MEGA Life and their sister company, Midwest, continue to sell these products after settling a multi-million dollar class action settlement whereby they were ordered to advise [prospects] of the inner relationships between the holding company [HealthMarkets], these groups [NASE], and the insurance companies [Mega Life and Midwest], so that people would really understand that these groups are not really independent, that they don’t necessarily have the consumers’ best interests at heart, and that the insurance companies are pulling off a fraud on these insurance consumers.

And Mega's insurance products continue to be available in nearly all US states.

States Where Mega Products Are Licensed

In other words, some of America’s most respected and influential financial organizations are behind Mega’s shoddy business practices. They use deception to prey on our most vulnerable citizens, but are mostly hidden from view.

In part, America’s health care crisis has grown out of financial reward and the lack of transparency. Over decades, these industry characteristics have fostered an opportunistic culture that pervades the business practices of many professionals and organizations in this sector. Ultimately, it is reasonable to believe that reform will come from the outside, as influential non-health care organizations realize that the health care industry’s inability or refusal to self-regulate threatens their interests, just as Mega appears to threaten those of individual purchasers.

Finally, there’s this. Some of you may have been struck by the similarity between the case of the Main family and the family dealing with the rotten insurance company in the movie of John Grisham’s The Rainmaker. Remember Mary Kay Place, testifying, reading the gleeful insurance executive's letter that denied her claim one last time? It could just as easily been Mr. Gedwed, HealthMarket’s CEO, laughing at the rest of us, singing “You must be stupid, stupid, stupid.”

Brian Klepper PhD is a health care analyst and advisor. He can be reached at  904.343.2921, bklepper@gmail.com. Click here to see more of Brian's recent posts.