A claimant speaks -- Part 1

From the front lines of ERISA abuses comes the following by a claimant who's just been through the ringer of an ERISA dispute. Not gonna name him; he's an interested reader who has offered to share his experiences. If you've perused this blog at all nothing he says will surprise you. But it's yet another indication that ERISA affects real lives in very bad ways.

The claimant in question has contributed a significant amount of material, so this'll be a series, of which the first installment is here:

Canceled: “ERISA is Everyone’s Problem”

Disclaimer: The story is true. Certain facts have been changed to prevent any legal issues and protect the privacy of individuals. This account was written using a voice to text translation program, therefore, the writing style and syntax may be affected.


My decision to post on this blog is to highlight the risk posed by ERISA. The laws no longer protect the individual or society as originally intended. A modern society cannot prosper without a well functioning health system. Health Insurance is not a right or a luxury. It is a necessity. We all get sick and need to access health services throughout our life. It is also important to realize that some industries are more important than others. They play a critical role in society and are worth protecting. Two obvious examples: Health Insurance is more important than chewing gum or perfume.

This not a story arguing the merits of free markets or government controlled health care. This is a warning of what happens when industries cross a line and become dangerous to society. Throughout U.S. history, there have been movements to limit and reform predatory industries. ( Example: Theodore Roosevelt dismantling the large Trusts and Oligopolies)

Today, insurance companies have amassed so much money and power that they operate by their own set of rules. The normal checks and balances of the free market system are no longer sufficient. To use a term from economic textbooks, these companies become “predatory” to both the individual and society. We saw this recently in the banking crisis and housing bubble. Wall Street banks operated, according to their own dictates, outside of the norms of free market system. The current legislation and the free markets failed to regulate and protect society from these predators.

Free Markets vs. Predatory Markets
In economics, they make a distinction between free market competition and predatory competition. In a free market system, companies create net wealth to society through jobs, taxes and profits. In a predatory system, companies take the wealth produced and distribute the profits to a select group. For society, it’s a difference between wealth creation and wealth destruction.

In a predatory system the balance of power is squarely with the company. They have enormous power to write laws, terminate employees and operate almost without recourse.

Recent history provides many examples from Tyco to Enron. Executives pay themselves large packages regardless of operating results and profits. Management runs these companies are run as if they are the property a select few to take wealth and value from the communities that produce them.

Identifying Predators
It is not always easy to identify a predatory business. However, it’s easy to identify three important indicators:

1) High Executives compensation. They are high relative to other industries or average employee salaries and are paid regardless of economic cycles.

2) Limited Employee rights. In a free market, employees retain a measure of protection and job security for performance. Under a predatory system, operating performance, profits and high productivity do not protect employees.

3) Culture or business model. In a predatory system, you are not an employee. You are never an asset. You are a liability. You are not part of wealth creation process.


Risk to Free Market System
Historically, the self-regulation of the free market has failed to keep predators from taking control of key industries. Wherever there are markets, there is unfortunately a need for regulation. Our free market system was never intended to let the interests of a few dominate the rights of all.


My ERISA story.
For 14 years, I worked for a large, profitable medical equipment supplier *

I was injured on the job and underwent two neck surgeries. I returned to work for a ten-month period but ended up aggravating my injury. In 2005 I had to stop working. Two additional surgeries later, I found myself 43 years old, disabled, in constant pain and unable to care for myself.

However, I never lost hope. I had excellent doctors, medical insurance and the support of good friends. My treating physicians were among the best in the country. They were authorities in their fields and had authored medical textbooks.

Financially, I was surviving. I thought that as long as my former employer was financially strong, my benefits would continue. My injury was well documented and I made sure to respond to all requests for medical information. I believed any attempt to challenge my case would be a waste of time and resources for any insurance company.

In retrospect, I was naive.

Health Insurance: It’s about money
Health Insurance is a misnomer. It is not about protecting your health. It is about return on investment.

When you are paying premiums, the industry is happy to have you as a customer. However, once you start collecting on a claim, you have become a liability. Unfortunately, the more you need the payments, the bigger the liability you become. If you have the misfortune to have cancer or become disabled, you often become a priority target.

Insurance companies pay a sizeable portion of their staff to deny coverage or cancel coverage. These are not the official job titles, but its what they are paid to do. To save their jobs, they must do their jobs. They must cancel policies. It’s a vicious circle.

Storm Signals
In 2008, as the stock market bust and housing bubbles ripped through the economy, No less than Warren Buffet, whose company owns GEICO insurance, started to predict tougher times ahead for the insurance industry.

A quick check revealed that, despite the economic downturn, my disability carrier Inco (not real name) was profitable. The CEO had been among the top three earning insurance company executives for the decade. Additionally, the industry continued to do well. The U.S. Department of Health and Human Services reported that profits for the 10 largest U.S. insurance companies jumped 250% between 2000 and 2009 while millions of Americans have lost coverage.
In 2009, the trend continued. Inco executives continued to pay themselves enormous salaries. This could only be done by large scale cost cutting. I started to get nervous.

I did not know, as early as 2009, Inco had already decided to terminate my benefits. They were in the process of constructing a paper trail. After all, ERISA has been gutted. For Inco, there was no risk in trying.

Cancellation: Actions without consequences
The outline below describes a series of deliberate actions by Inco in flagrant violation of good faith and proper procedure. They are examples of Inco, deliberately withholding information, omitting material facts and misleading treating physicians.


Violation #1:
In violation of due procedure, Inco called my lawyer to inform him my benefits had been terminated retroactively at the end of the prior month.

Violation #2:
Inco did not send an explanation letter until three weeks post termination. The letter did not correspond to the reasons cited in the phone conversation.

Violation #3:
For cause of termination, Inco stated, failure to supply medical information. Yet, in the same termination letter, they referenced the information they claimed to be missing. Inco refused attempts to clear up any misunderstandings.

Violation #4
The Inco medical report and termination letter deliberately omitted basic information including: Diagnosis, number and types of surgeries, results of surgeries, use and indication for medications, daily functional state and ability to perform work.

Violation #5
Inco deliberately misrepresented the opinion of treating physicians. Several attempts by the physician and my attorney to rectify the situation were ignored.

Violation #6
In a request for medical information, Inco deliberately misled a treating physician. Several attempts to clear up the matter were ignored.

In the end, I was lucky. Inco had so clearly violated good faith and misrepresented the facts that benefits were eventually reinstalled. I suffered financial damages and was nearly forced to sell my condo. Under ERISA I am not entitled to recover any financial losses. I can only wonder how many others were cancelled and unable to reinstall benefits either due to lack of financial resources, lack of legal representation or failure to keep documentation.

ERISA is the Problem
As noted in the blog, the insurance industry has changed the ERISA laws to exempt themselves against wrongful termination as well as losses and damages inflicted on improperly or illegally terminated policies. There is nothing to stop an insurance company from withholding benefits and waiting you out to see if you have the financial resources, education, and legal skills to regain your benefits.


What to do:
There are several steps to take to educate and protect yourself. I’ve outlined a few below.

1) Be proactive: Understand it can happen to you
2) Support reform: It is the right thing
3) Take care of your health.
4) Educate yourself on your health plan and benefits providers.
5) Keep records of all communication with insurance companies.