A Perfect Example of Adverse Selection

People like to speak about those evil insurance companies, not wanting to cover people with pre-existing conditions, but let’s play devil’s advocate for a moment, and look at what happens when the government forces insurance companies to accept all risk, without question.

Here is a perfect example of what we in the insurance world call Adverse Selection, the practice of purchasing insurance when needed, and cancelling when it’s no longer convenient.   In this case, a lawsuit was filed over a massive scheme to game the system.  Even I was fooled by DaVita, when they came to me as a broker.  In fact, the response I received from their insurance counselor when questioning the practice was:

“I understand your concerns over an increased population of high risk patients and agree that they should be spread out amongst carriers depending on their need for additional coverage and what they may be utilizing the coverage for.

There are a multitude of reasons these patients could really use coverage beyond Medicaid.  The biggest reason is access to care.  Being on Medicaid, these patients often cannot even obtain a primary care physician, let alone access to various specialists that could help with co-morbidities that could be keeping them off the transplant list.  Some of the other reasons could be the ability to travel and avoiding the risk of loss of coverage as Medicaid can tend to be very unstable coverage and can be terminated for a multitude of reasons.

As far as total numbers of patients we are looking to assist in enrolling in new plans for 2016.  I have about 35 patients that may be looking for new coverage.  That being said, there are also two other insurance counselors in Colorado with roughly about the same number of patients.” – Nov 4th, 2015 (date of email response from DaVita insurance counselor.  I still have a copy of this email message in my records.)

After receiving the answer above, and calling the insurance company (Anthem) to report and to verify that these enrollments would be within the law,  I agreed to broker a few of DaVita’s clients, as my heart went out to the patients who were in need of better access.  Much to my chagrin, I learned of this lawsuit today, announced by The Denver Post.

DaVita steered poor dialysis patients to private insurers to pump up profits, lawsuit says

Obamacare has created a cesspool of gamers…those who wait until open enrollment to treat non-emergent health issues and cancel shortly thereafter.  In fact, the average life of an Anthem individual plan in 2016 was only 7 months!  To those who haven’t understood why your health insurance rates are so high, now you know!

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