Tracy Cooper couldn’t believe her health insurer tried to stick her with a $16,000 hospital bill. The company said her insurance didn’t cover that hospital.
Cooper, however, didn’t have any choice — she was unconscious. Paramedics had rushed the Shawnee woman to the hospital they felt offered the best treatment.
Last year, a hailstorm bombarded Jim Weakley’s century-old home in Greenwood, Ind. But his insurer wouldn’t cover the roof damage.
“I was getting hosed big time,” Weakley complained.
Charles Sorg of Gahanna, Ohio, spent 30 hours trying to get an auto insurer to pay $500 for his damaged pickup.
“People will just give up,” he said. “Some will die waiting.”
But Cooper, Weakley and Sorg are among hundreds of thousands of angry consumers all across America who didn’t give up — they lodged complaints with state insurance regulators.
The Kansas City Star spent 11 months examining insurance problems, including an analysis of a national database with more than 600,000 such complaints filed from 2003 through 2005. In all, the newspaper analyzed nearly 35 million records. Experts said it’s the first time a newspaper has done such a comprehensive national database analysis.
The analysis provided a window into consumers’ frustrations with unreturned phone calls, senseless red tape or horror stories over claims handling. Those hassles come at an emotionally wrenching time, when many people are reeling from accidents, natural disasters or even life-threatening illnesses.
And when it comes to complaints, the newspaper found that insurance companies don’t stack up favorably compared with other financial services such as banks or stock brokerages.
Upset insurance customers slug it out daily with billion-dollar companies over thousands of dollars or mere pennies. They filed 246,000 complaints over auto insurance, 133,000 over group health insurance and 70,000 over homeowner’s coverage during the time of the analysis.
Most of the time, consumers were right. The analysis showed that state insurance regulators sided with consumers 60 percent of the time. The regulators’ assistance ranged from simply providing consumers with advice to actually helping them with their bills.
Cooper, who was knocked out during a softball game, got her $16,000 hospital bill waived. Weakley got around $27,000 for his roof and other repairs. Sorg got $500 to fix his pickup.
Some consumers are even more stubborn. Kathleen Cain, a Topeka pediatrician, collected 19 cents from a health insurer for interest on a late payment. “It’s just the principle of the thing,” Cain explained.
Consumer advocates say the newspaper’s findings show that far too many insurance companies place profits ahead of consumers’ interests.
“The problem is there,” said Bob Hunter, director of insurance for the Consumer Federation of America, “and your numbers show it.” Hunter and other consumer advocates suspect thousands of additional complaints go unreported.
An insurance industry spokesman, however, downplayed the complaint data’s significance.
“Only an infinitesimally small number of claims are something that rise to that level (of complaints),” said Robert Hartwig, chief economist of the Insurance Information Institute. Hartwig said that insurers are doing a good job overall and that many disputes arise because consumers don’t understand their policies or don’t have the proper coverage.
To be sure, insurance companies handle millions of claims fairly and promptly, although the industry organization says it does not track exactly how many claims are filed each year. No clear trend for complaints was discernible from the 2003-2005 data reviewed by The Star. Complaints were up 3 percent in 2004, but dropped 11 percent in 2005. Complaint data for 2006 are not complete.
But state insurance regulators last year received nearly six times more complaints than federal bank inspectors, who deal with problems involving bounced check fees or mortgage payments. Insurance regulators also got almost 10 times more complaints than securities regulators, who deal with problems involving mutual funds and unwanted e-mail stock tips.
To further evaluate insurers, The Star calculated complaint ratios for the 2,400 largest companies in auto, home, life, annuities, group health and individual health coverage.
The Star calculated the ratios by totaling all of the complaints and premiums for a particular type of insurance.
Then the newspaper figured each company’s percentage of those complaints and premiums. Those percentages were used to arrive at a complaint ratio for each company.
Companies whose ratios were above 1 performed worse than their competitors, and companies with ratios below 1 performed better.
The complaint data for the national analysis came from the Web site of the Kansas City-based National Association of Insurance Commissioners, which compiles complaint data from the states. But the data have limitations. Some states do not send all of their complaints to the association.
Among the nation’s 20 largest insurance companies for auto, group health and home, the analysis found:
•For auto insurance, Allstate Insurance Co. of Northbrook, Ill., the “Good Hands” people, scored the highest complaint ratio.
•For group health insurance, two United HealthCare Insurance Co. affiliates — Oxford Health Plans N.Y. Inc. and United HealthCare Insurance Co. of New York — tallied the highest complaint ratios.
•For homeowner’s insurance, Farmers Insurance Exchange of Los Angeles (not to be confused with the local Farmers Insurance) had the highest complaint ratio. Farmers also had the most complaints for using credit histories to help set insurance rates, which critics contend is discriminatory.
The ratios showed significant variations, for example, between the nation’s two largest auto insurers. Allstate had a complaint ratio of 1.33, while the State Farm Mutual Automobile Insurance Co. had a complaint ratio of only 0.42.
“That’s a big difference,” said Dan Anderson, an insurance professor at the University of Wisconsin-Madison. “Obviously, State Farm does a better job.”
Allstate spokesman Mike Siemienas said Allstate does not comment on matters involving competitors.
But he did say that “the total number of complaints filed against Allstate make up less than 1 percent of our customer base.”
What’s at the top of the list of consumer gripes with most insurance companies? Taking too long to settle claims, The Star found. Consumers filed 131,000 complaints over claim delays. Complaints over claim denials were second with 119,000. Low settlements came in third with 91,000.
The money at stake in such disputes can be significant and touches people in all walks of life. Insurance is a $1 trillion a year industry, covering just about everything from underground coal mines to high-flying jets.
There are more than 330 million life insurance policies in the United States, plus policies covering 175 million vehicles from Audis to Zephyrs. About 7 cents of every dollar spent by Americans goes to insurance, more than is spent on entertainment or clothing.
It’s also profitable. Insurers’ profits last year totaled about $77 billion. That’s what many disputes between insurers and consumers come down to — who gets what.
“It’s always about the money,” said Alessandro Iuppa, Maine’s superintendent of insurance and president of the National Association of Insurance Commissioners.
Allstate Insurance had the most overall complaints involving claims handling issues with 15,500. That’s 35 percent more than State Farm, the insurer with the next-highest number of such complaints. Its total premiums are actually much larger than Allstate’s.
Allstate officials said they get many complaints because their company is so big.
“Our goal is complete customer satisfaction, but there is not an industry out there that doesn’t have customers who are unhappy at one time or another,” Siemienas said. “We are the second-largest personal lines property and casualty insurer in the country.”
Some attorneys who’ve sued Allstate weren’t surprised by the findings.
“They’re the ‘Good Hands’ people for the pittance that they offer you,” attorney Dale Golden said during a court hearing last year in Kentucky. “If not you can forget about that, they’re going to put the boxing gloves on those good hands, and they’re going to take advantage and batter victims …”
To support his argument, Golden showed the court a slide that an Allstate consultant, McKinsey & Co., prepared for the insurer. The slide actually referred to the “Good Hands vs. the Boxing Gloves” treatment.
Allstate hired McKinsey to help develop new claims handling practices, some of which the insurer adopted in 1995. Allstate said the new system delivers prompt and fair payments and weeds out fraudulent claims.
But the pending Kentucky lawsuit alleges that Allstate actually revised its claims handling practices to low-ball consumers in order to boost profits.
Allstate denied those allegations.
“Claimants who do not accept a reasonable amount in settlement of their claims, but insist on more than they are entitled to, can decide to initiate litigation,” the company said in a statement. “Claimants who do so will have to contend with a vigorous and appropriate defense that Allstate affords its insureds.”
Two pending lawsuits filed in New Mexico also raise allegations over claims handling. “It’s no holds barred,” said plaintiff’s attorney David Berardinelli. “It’s aggressive litigation tactics.”
Allstate defended its practices, saying it pays claims promptly and fairly.
“When claims did proceed through to trial, juries were likely to render verdicts consistent with Allstate’s evaluations,” the company said.
James Anders of Brownsburg, Ind., is going to court to find out if that’s true.
On a January evening last year, Anders waited at a red light in Indianapolis when another vehicle rear-ended his car. Fortunately for Anders, he had a witness — an Indiana state trooper next to Anders’ car. The trooper cited the other driver.
Allstate just happened to insure both drivers involved in the accident.
Anders filed a claim against the other driver’s policy. In a letter to Anders, Allstate said it would not pay his medical expenses beyond $200 for his initial treatment, saying the accident was at such a low speed that Anders couldn’t have been seriously injured. However, doctors found other problems, and his medical bills for shoulder surgery totaled about $25,000.
Anders complained to the Indiana Department of Insurance. But it ruled that, under state law, it couldn’t order Allstate to pay more and closed the case.
He then sued the other driver, who through a lawyer provided by Allstate has denied responsibility for the accident and is contesting the medical claim. That driver’s attorney argues the injuries could have stemmed from a pre-existing condition.
“Now, every time I see the commercials about the ‘Good Hands’ people,” Anders said, “it makes me sick.”
His attorney also found the situation strange, considering a trooper saw the accident. “That happens 1 in 10,000 times,” said Indianapolis attorney Don Levenhagen.
Allstate’s Siemienas said, “We do investigate and evaluate each claim on its own individual merits and will only pay what a claim is worth.”
Few political debates in the last decade have festered more than the one over affordable health insurance for average Americans.
Even when they have health insurance, lots of consumers still aren’t happy. The second-highest number of overall complaints in The Star’s analysis involved disputes over group health coverage.
Among the 20 largest group insurers, Oxford Health Plans N.Y. Inc. and United HealthCare Insurance Co. of New York had the highest complaint ratios — more than five and three times above the median respectively. Each also had more than 1,000 complaints against it for claim delays and low settlements from 2003 through 2005.
UnitedHealthcare, headquartered in Minneapolis, said its affiliates strive to be the best health companies in the country and are always looking for ways to improve their performances. The company said that complaints represent a small fraction of all claims, but that it takes them seriously and works closely with regulators to address customer concerns.
Sometimes United HealthCare has been at odds with regulators. Two years ago, North Carolina officials leveled their highest fine ever — $2.2 million — against United HealthCare Insurance Co. and UnitedHealthcare of North Carolina Inc. after receiving complaints about incorrect claims payments, improper claims denials and other issues. The two health insurers did not admit any wrongdoing.
Health insurance disputes sometimes have far more serious implications than an unpaid bill.
Last year, Melissa and Benjamin Halpern’s newborn son, Joshua, needed a special formula because of severe allergies to other formulas and breast milk.
“If he didn’t get the formula, he would die,” said Melissa Halpern of Plano, Texas, “and they (United HealthCare) said, ‘No. We won’t pay for it.’ ”
She estimated that the couple spent about $22,000 of their own money for the formula. Joshua recovered and is doing fine now.
Eventually, they switched to another insurance company that pays for the formula. They also filed a complaint against United HealthCare with the Texas Department of Insurance.
In September 2005, United HealthCare told Texas regulators that because it had received new information, it would pay the Halperns.
But no one told the Halperns — until The Star did earlier this fall.
“You’d think they’d send a letter,” Halpern said. “I’m extremely surprised United HealthCare and the Texas Department of Insurance wouldn’t have followed through.”
State records showed that the insurance department sent an e-mail to the family, but the e-mail never went to the Halperns. Texas insurance officials said they made a mistake and took steps to correct the problem.
As for the Halperns, Melissa said they recently received $13,000 from United HealthCare for some of the formula bills.
Homeowner’s insurance companies sometimes use credit histories to develop a “score” to help set premiums, reduce bad risks and predict future claims. But only about one-third of consumers are even aware of it, according to a U.S. Government Accountability Office report last year.
Despite that lack of knowledge, The Star’s analysis found that policyholders had filed 1,450 complaints nationwide over credit scoring in the last three years.
Of those complaints, Farmers Insurance Exchange of Los Angeles topped the list with 147 for all kinds of insurance. Three of Farmers’ other companies, including its Overland Park operations, are among the top five for similar complaints. Those companies accounted for more than a quarter of all the complaints involving credit scoring.
Farmers Insurance Exchange also had the highest complaint ratio among the 20 largest home insurers. In all, consumers filed more than 1,000 complaints against Farmers Insurance Exchange over claim delays, low-ball offers and other issues.
The complaints represent less than 1 percent of its policyholders, Farmers said, and it’s striving to improve customer service.
A Farmers Group Inc. vice president attributed the higher credit-scoring complaints to doing a better job of informing policyholders about its use of the practice than its competitors.
“We went out of our way to make sure customers know that their credit histories were involved with their rates,” Bill Martin said. “We are the consumer-friendly user of this practice.”
Not all of Farmers’ home insurance customers agree.
Dee Anderson of Frisco, Texas, complained in 2004 to state regulators after Farmers downgraded his credit standing one notch and raised his premiums 8 percent. Anderson didn’t understand the changes.
“My payment history with all financial institutions is perfect,” wrote Anderson, who switched insurers. Anderson is also concerned about the effect of credit scoring on people less well off.
Indeed, consumer groups call credit scoring the “new redlining,” a discriminatory practice that penalizes the poor and minorities in certain neighborhoods.
“People at the bottom of the economic ladder are going to have the hardest time getting the insurance they need,” said Norma Garcia, a Consumers Union attorney.
Martin, however, said that credit scoring allows insurance companies to offer bigger discounts because they can predict losses better for home and auto insurance. He maintained that insurance scoring actually helps minorities who have good credit. Farmers and the insurance industry noted they do not consider race or income in credit scores because, they say, they don’t collect such data.
Credit scoring, however, is drawing national scrutiny. At Congress’ direction, the Federal Trade Commission and the Federal Reserve Board are studying its impact on minorities being able to obtain and afford insurance.
‘Stay after them’
A review of complaints from disgruntled consumers across the country makes one thing clear: If you’re upset with how an insurance company is treating you, and you’re convinced you’re right, don’t give up the fight.
Though insurance companies may have more money than you, persistence pays off.
Luther “Jack” Brasuell of Van Buren, Ark., has fought Connecticut General Life Insurance Co. for more than two years over paying for dental implants following cancer treatments.
Brasuell complained that the insurer, better known as Cigna, approved the implants and then balked at paying about $11,500. Cigna officials declined to comment on the dispute, citing patient privacy laws.
Because he had insurance through a former employer based in Indiana, Brasuell had to take his complaint to that state. Over the months, his file grew to more than half an inch thick.
Eventually, Cigna paid about $4,400, although Brasuell is still fighting over the rest of the bills.
“The main thing I learned was how to fight: Read your policy, talk to people, go to the insurance commissioner and be persistent,” advised the 62-year-old former college instructor. “Just stay after them, stay after them.”