The Real Villains of Tort Reform Debates: Insurance Companies

This month, pro-civil justice blog ThePopTort.com ran a story on an article published by the nonpartisan policy group the Center for Public Integrity called “Keeping an Eye on Insurance Companies that Refuse to Pay Claims.” Author Wendell Potter, a former VP at insurance giant Cigna, reports that companies like Aetna (which had a net income of $1.91 billion in 2013) have made a habit of denying medical payments to its policyholders, often in times of great need.

Potter uses the example of Cliff Faraci, a so-called good Samaritan in Arizona who tried to rescue a 19-year-old woman from a wrecked car. Seeing smoke from under the hood of the vehicle, Faraci rushed to the front driver’s side window to turn off the ignition, but was unable to reach it. When he leaned about half of his body through the window, the engine caught fire, exploding the breached gas tank and turning the whole vehicle into a fireball. Faraci was standing in a pool of gasoline, and suffered first- through third-degree burns over much of his body, in addition to watching the young driver of the vehicle burn to death.

After a week of treatment, Faraci received a letter from his insurance company, Aetna, explaining that its administrators did not consider his injuries to be “sufficient to warrant” his weeklong hospitalization. In a news report about Faraci’s courageous actions, journalist Robert Anglen wrote, “Almost overnight, the freeway good Samaritan had become the victim of a health-care nightmare. His case is an example of what can happen when an insurance company decide[s] to question the administration of care provided by doctors and other medical experts directly involved in the patient’s treatment.” Having kept up with his premium payments, Faraci could not believe Aetna would deny him coverage.

Even after appealing twice, the insurance conglomerate refused to pay for his treatment, which totaled around $82,500. They argued that Aetna alone, not doctors or other health care providers, reserves the right to determine which treatments are medically necessary and which are not. Only after involving a local Arizona news station and an external review process made possible by the Affordable Care Act did the insurance company give in and agree to pay Faraci’s medical bills. (The external review board deemed Aetna should pay half, but the company–perhaps motivated by negative press–later offered to foot the entire bill.)

Potter concludes his piece with some statistics. In the first quarter of 2014 (up to April 24),The Wall Street Journal reported that Aetna’s medical loss ratio, described as “the amount of premiums used to pay patient medical costs,” dropped to 80.4 percent. In other words, the company spent 80 cents on each dollar spent by its policyholders through premiums. This helped the company profit a staggering $665.5 million in the first quarter of this year alone–an increase of 36 percent from the first quarter of 2013.

It should be clear from the reports and arguments above that the real villains in the ongoing debates about healthcare and tort reform are neither patients, nor attorneys, nor doctors, but insurance conglomerates worth billions and billions of dollars. Though the external review process that accompanies the Affordable Care Act will help some patients collect money for medical bills from their insurers, insurance companies are in the business of making money not making sure justice is done.