Sunday, October 14, 2007

The Golden Rule of Insurance

I was amazed in the Graeme Frost smear case of the extremely low rates quoted for family health insurance available from Golden Rule Insurance. I immediately had my suspicions.

I once lived in Palm Beach Gardens Florida which was a subdivision partially based on the John D. MacArthur fortune. Most of the story is buried now and not available on the internet but MacArthur made his first fortune marketing lousy insurance to poor people and then refusing to pay many claims. He routinely fell afoul of state regulations and always just wiggled and squirmed away. One time his company was about to be closed down for having too low of reserves and he promised to take care of it. They expected him to raise some money to place in reserve. He raised the money by instructing his staff to disallow all the claims they had pending. Later MacArthur diversified into other fields like diary and real estate and still later tried to make up for his immoral beginnings by going into philanthropy. Setting up foundations means the government doesn't get the money and you get to decide what programs to fund. Yes, his is the fortune behind the MacArthur genius grants.

The Golden Rule Insurance sure sounded like the name of one of his old companies. I couldn't find a family connection but it seems a similar company like the one "The Rainmaker" is based on. It was investigated by the U.S. House Energy and Commerce Committee because according to Rep. John Dingell it "routinely engages in extraordinary practices designed to intimidate, coerce, and frighten...and scares consumers with doomsday predictions shored up by misinformation and threats of canceled policies." This investigation was dropped when the GOP took back control of the House - they were big GOP contributors.

Golden Rule Insurance is still known for marketing to poor people with low cost policies and then denying claims. It is now specializing in low cost but very high deductible policies honored by limited service providers and policies linked to a mandatory medical savings account.

Here is one interesting discussion involving Golden Rule - if they have decided something is not covered, either because they disallow it or you are under their huge deductible, Golden Rule will sent a statement to both the insured and the provider of what they would have paid per their contract with the provider but it is up to the provider what they will bill the not covered insured. It is not clear if they allow the insured provider to direct bill the customer for their standard rates even for the treatments they have paid for. The Health Care Blog thinks so in this post where he discusses what a scumbag GoldenRule Healthcare is. I have a friend who was just billed by the hospital and doctor for the difference over items her insurance paid, is this getting common?

According to BusinessWeek Golden Rule is supposedly cleaning up its act since being acquired by UnitedHealth.
Soaring demand is one reason why UnitedHealth paid $500 million in 2003 for Golden Rule, of Lawrenceville, Ill., problems and all. Since 1995, Golden Rule has faced 15 investigations by insurance officials for aggressive sales tactics and questionable marketing. That compares with just nine investigations at UnitedHealth, though Golden Rule's revenues barely equaled 3% of UnitedHealth's 2003 revenues. At its low point, in 2002, Golden Rule settled for $660,000 a nine-state investigation that found its small-group policies required employees to submit "proof of good health," a violation of federal health-care rules. In addition to the payment, Golden Rule agreed to make "substantive" changes in the way it does business in those states.
Golden Rule Insurance provides a case study of how "he who has the gold makes the rules." The GOP has encouraged these types of companies with their "health care reforms" of high deductible policies and health savings accounts. In fact, Golden Rule suggested it and paid the GOP politicians.

Tying this back to the current SCHIP controversy - Golden Rule is likely funding GOP politicians refusing to expand SCHIP. Unlike most insurance companies low wage earners are their market.

Support the expanded SCHIP program.
First, under the proposal, 70% to 80% of children in the program would be from families earning less than twice the poverty level ($20,650 for a family of four).

Granted families of four earning up to $60,000 a year would qualify for the program in most states. But given the fact that the average annual premium for family coverage is now pushing $13,000, it is not at all unreasonable to suggest that families earning $60,000 before taxes cannot afford private insurance.

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