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Clinical Privacy and Insurance Application Rejection

Mark Dombeck, Ph.D.

Imagine, if you will, the following scenario:

Being of reasonably sound mind and body, you seek the help of a psychotherapist during a period of life-crisis (divorce, death of a parent or spouse, unemployment, etc.). During your first meeting, your therapist asks you how you intend to pay for her services. You respond by pulling out the insurance card you received from your employer. You sign papers authorizing the insurance company to have access to your therapy records and arrangements are made. Your therapist recognizes that she has to officially diagnose you if she is to obtain reimbursement for her services. She selects a DSM code that more or less makes sense for your current situation: "Adjustment Disorder with depressed mood" and goes on about her business of helping you. After a number of sessions, you find that you are in a better mental and emotional place and you terminate therapy.

A few years go by...

Things have changed in your life. Most notably, you are no longer employed. Perhaps you've been laid off from your former workplace. Perhaps you are in the process of starting a business. Perhaps you are staying home to care for a child you've recently adopted. You decide to apply for a variety of insurances that will help you to manage the risks inherent in life (health, life, disability). A few weeks after filling out your applications, you receive a reply from the insurance company that goes something like, "Dear So-and-so. Upon review of your application we are sorry to report that we cannot insure you at this time". A rejection? What's that all about? You call them up and find that they have rejected your application for certain insurances because of your past history of mental illness.

Outrageous, right? Nope. This is more our less how our insurance system works.

The chain of events that has led up to your insurance rejection went something like this. All those years ago when you were in therapy, your diagnosis was sent back to the insurance company that was paying for your therapy. They, in turn, sent it out to an institution known as MIB (short for 'Medical Information Bureau', not 'Men In Black'). MIB is a not-for-profit data warehouse sponsored by major insurance carriers. MIB's purpose is to record, retain and share personal medical information collected about you by one insurance company with other insurance companies. As part of the standard process of reviewing your application for insurance coverage, the insurance company called up MIB and took a look at your record. Noting the 'mental illness' diagnosis there, they decided that it was not in their interests to offer you insurance because of your previous diagnosis. Their reasoning would be something like, "This person may very well get depressed again in the future, possibly even depressed enough so that you require treatment or become disabled. We'd have to pay for that treatment. There is, therefore, too much risk involved in insuring this person".

From a purely business point of view, we can certainly understand why an insurance company would want to consult information about your past when making a decision as to whether to insure you. Insurance companies make money when they pay out fewer benefits than they have collected in premiums. It is in their interests to have as many healthy customers and as few service-using customers as possible. But viewing this issue solely from a business vantage obscures the fact that serious ethical issues are in play; people's lives are at stake when they cannot get reasonably easy access to healthcare. And, even as it is true that someone with a past history of depression is much more likely to require treatment for depression in the future than someone who has never been depressed before, it is also true that a person with a past history of depression has a greater need for depression coverage than someone who is unlikely to become depressed.

You may wonder why I made it a point in my example above to specify that you were unemployed or self-employed when you made your application for health and disability insurances. This is because the insurance you can by as an individual has different standards applied to it than the insurance that you can receive through a company-sponsored insurance plan. Individual insurance applications are checked against MIB and similar institutional records to see if you are likely to end up costing more than you will pay out. Company-provided 'group' insurance applications, on the other hand, are not checked against MIB records; so long as you are an employee of a medium to large firm (at least in the USA), you are able to get insurance coverage. I'm not entirely certain why this is so, but I believe the idea in play here has to do with whether your candidacy for insurance coverage is examined individually, or against the backdrop of a large group of fellow employees. In the company provided insurance situation, where there are large numbers of fellow employees to offset the risk you may contribute to the total pool, there are bound to be more healthy employees paying into the system than ill ones. In the individual situation there is no one else about to help the insurance company spread out their risk and it becomes a crap-shoot as to whether the insurance company will make or lose money. I don't know what the originators of this differential-evaluation practice intended or how the system evolved to be this way. I do know that the end-result appears to be that only healthier, higher functioning employed people will have easy access to insurance, leaving those people with greater needs for healthcare at the mercy of under funded and overloaded public health systems.

 


MIB rationalizes its existence by suggesting that they function as a sort of police agency that tickets anti-social insurance applicants who would try to gain access to insurance by not disclosing their checkered pasts, as is evident in this quote taken from the MIB website.

 

"You're driving on the highway and there's a "Road Construction Ahead" sign indicating you should merge to the left. You responsibly start moving over but several "fudgers" ignore the signs and keep on roaring ahead in the right lane. Some real jerks even have the nerve to continue to pass driving on the shoulder of the road, just to get a few more car lengths ahead, counting on the fact that some sympathetic party will let them back in line at the last second. Are these compliant people who let them in naïve enough to believe that these poor people were too stupid to have realized that the signs were intended for them too? Or are these "fudgers" simply taking advantage of predictable human nature?"

"As a responsible person who followed the law, all you're left with is a little sense of frustration and semi-outrage and wishful thinking that there's a policeman somewhere who is positioned up front to ticket those whom they catch in the act – especially those driving on the shoulder."

"Unfortunately, in life, there are also some individuals who seem to believe that people who are forthright and honest, when they apply for life, health, disability, and long term care insurance, are "suckers". They somehow rationalize that stretching the truth or omitting relevant medical history or other pertinent information on an insurance application is the company's problem, not theirs. Were there not safeguards in place, honest and responsible insurance applicants would be paying substantially more for their life, disability, and long term care insurance premiums. . . in fact. . .subsidizing those who should be paying more."

 

In the above quote, MIB appeals to your rational business-minded side. They are suggesting that the service they provide helps keep your insurance rates down by making it easier for insurance companies to discriminate against greedy high-service-utilizing applicants. But there is probably more to you than simply a business-minded side. I'll bet you see through this rhetoric enough to know that there is something decidedly unspiritual and fundamentally anti-social in the act of denying the truly and legitimately needy access to health services they require.

While it is completely true that some insurance applicants do actively seek to defraud insurance companies, it seems quite misleading of MIB to encourage you to assume that all persons who might want to keep their past medical records private so as not to be discriminated against are sociopaths and cheaters. Is it really anti-social behavior for someone with a history of mild depression (or even serious depression) to want to keep their medical record private when their access to healthcare and disability insurance would be cut off if a prospective insurer were to see that record? It may well be anti-social behavior from a libertarian or ayn-randian point of view, but from a more moderate stance, it ends up seeming only desperate and human.

 


I've wondered for some time why there is seemingly no easily accessible way to pool together large groups of the uninsured (and in some cases uninsurable) for precisely the purpose of providing them with a way to purchase reasonable health or disability insurance. Unless only legal forces force insurance companies to not reject insurance applications made through company-sponsored programs, surely the same pooling of risk that occurs in a company plan could exist through other means of grouping applicants. Why does the vulnerable individual have to pay such a high price for not being employed? The answer that comes to mind is, 'politics'. I suppose that it is simply not in the collective interests of those in power to provide this sort of access to care.

 


Your options for dealing with this situation aren't extensive. The health care system is a mess and even the well-insured have difficulty navigating it these days. Health care of all sorts is also very expensive. If you become really sick at any point in your life, requiring extensive care, you'll have little choice but to trade your medical privacy and future individual insurability for access to treatment. Although future access to insurance is important, it isn't worth jeopardizing your present-day health or quality of life over by forgoing treatment.

At the individual level, if you have the means, and if your problems are moderate in scope, you can do something about the situation: cut the insurance companies out of your personal healthcare loop by paying cash for your health treatments. For example, one might pay cash for psychotherapy. There are today a growing number of psychotherapists who, for a variety of reasons that include frustration with paperwork and ethical upset over not being able to protect their patient's confidentiality, no longer will accept insurance as a means of payment for their services. There are positive direct benefits for patients to work with therapists on a cash-only basis: Paying cash for treatment makes therapy a straightforward transaction between yourself and your therapist and removes the need for your therapist to diagnose you, or to report anything about you to any sort of third party. Since doctor-patient communication is protected under most state laws, it would take a court order to have your records revealed to anyone. The MIB need never know anything about your treatment. There are also positive side effects that come from paying cash for treatment, perhaps most importantly the fact that you tend to become very motivated to get your money's worth out of the treatment in a way that might not have occurred if someone else were paying most of your way.

Real though the privacy and motivation benefits may be, we must acknowledge that cash-for-treatment arrangements are at best only a partial solution to the problem of healthcare privacy. Cash payments can only be made by comparatively wealthy patients, and is not practical at all when expensive treatments are involved. It is also fairly useless when medicines or other treatments that require (by law) that third (record-keeping) parties (e.g., pharmacists) be involved. Aside from a few not-for-profit organizations, like Hartford, Connecticut’s Volunteers in Psychotherapy (which offers no-cost psychotherapy to patients willing to do community volunteer work), the unemployed and more vulnerable members of society are out of luck.

Well, I don't have any real suggestions as to how to solve this problem. But I bet some of you readers might have a suggestion or opinion to share. Feel free to comment on this editorial by clicking on our new 'add comment' feature that appears at the bottom of this page. And take a few minutes to explore MIB's website which is available at www.mib.com. Until next time.

Mark Dombeck, Ph.D.
Director, MHN