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A Nation of Laws

I’ve heard people say, “We are a nation of laws,” as if it is a good thing. I believe it is a bad thing. If you consider laws in abstract terms, you may think about the US Bill of Rights and laws against murder and theft. But the majority of laws are like the ones I’ve worked with for many years: administrative laws. There is a pattern that happens with laws. Laws discourage individual responsibility, and they help governments grow.

Here’s how it works:

  1. Government passes a law and starts enforcing.
  2. Under the banner of “compliance,” individuals in businesses create checklists designed to standardize processes. This discourages responsibility and trust among individuals working in the company. People stop thinking about what to do as they follow company procedures.
  3. Some of these individuals begin engaging in business practices that coerce or harm others.
  4. People and media notice these actions, and they contact their government representatives.
  5. Government convenes hearings where CEOs testify that their companies engaged in horrible practices because the law allowed it.
  6. Government passes a new law and starts enforcing…and the cycle begins again.

The Cycle in Action

The practice of “recission” by some employees working in the US health insurance industry offers an example of this cycle in action.  Recission has been defined as the unmaking of a contract between parties, to rescind or set aside a contract.

On July 27, the Subcommittee on Oversight and Investigation of the U.S. House Committee on Energy and Commerce held a hearing about recission. The proceedings from this hearing highlighted the harmful actions taken by some insurance company employees. The committee’s supplemental report summarized the “haphazard collection of inconsistent state and federal laws” that contributed to the decisions by insurance company executives to support the practice of recission in their companies.

Incomprehensible Forms

During the hearing, Chairman Bart Stupak, a congressman from Michigan, asked Don Hamm, CEO of Assurant Health, whether he could explain the company’s insurance application form. Mr. Hamm ducked the question, claiming he wasn’t sure if the application form was current.

Effects of Recission on a Patient

Robin Beaton testified at the hearing regarding her struggles with her insurance company. When Ms. Beaton filed a claim for breast cancer treatment, Blue Cross/Blue Shield refused to pay for this treatment while they conducted an investigation triggered by a diagnosis of acne in her prior medical records. Subsequently, they rescinded her coverage.

According to Ms. Beaton’s testimony,

There is a nurse in my church who works full time for Blue Cross. Her sole job is to go through medical records searching for reasons to cancel people’s policies. After she heard what happened to me, she came to me and told me how very sorry she was.

Ms. Beaton turned to congressman Joe Barton of Texas for help. Three months later, her insurance was reinstated and she finally received surgery. During the time of this treatment delay, her tumor had grown from 2 cm to 7 cm.

Many other examples of recission’s human toll are highlighted in one of the committee’s fact sheets.

“Doesn’t That Bother You?”

Following testimony of patients whose policies had been rescinded upon filing claims, committee chair Bart Stupak asked Don Hamm, CEO of Assurant Health,

Doesn’t it bother you that people are going to die because you insist on reviewing a policy that somebody took out in good faith and forgot to tell you that they were being treated for acne? Doesn’t that bother you?

Mr. Hamm replied,

Yes, sir, it does. And we regret the necessity that that has to occur even a single time.

Perhaps further evidence that Assurant’s employees are bothered by the consequences of recission, when I tried to link to the Assurant television commercial that the committee had posted on YouTube, I saw the following message instead:

This video is no longer available due to a copyright claim by Assurant Health.

In a radio program a few weeks after the hearing, committee member Jan Schakowsky from Illinois said,

Looking at the face of a woman who had fast-moving breast cancer that could take her life, I just could not understand how the people who were testifying for the insurance industry could sleep at night, as people, as individuals.

I don’t often sympathize with politicians, but I share this congresswoman’s confusion.

Effects of Recission on Insurance Companies

If you suspect that the practice of recission is motivated by profits, you’re probably right.

According to the committee’s supplemental report,

On June 9, 2009, Committee staff conducted an interview of Michael Corne, the Vice President of Health Products, Marketing, Government, and Regulatory Affairs for Golden Rule. Mr. Corne asserted that the company maintains no single list of diagnoses that automatically trigger reviews. Mr. Corne was unable to explain in detail the company’s process for triggering investigations, but he did confirm that one variable considered is the cost of the treatment.

As described in another fact sheet, the three companies with CEOs who testified in the hearing rescinded nearly 20,000 policies and saved more than $300 million through recission during 2003-2007. Some insurance companies have clearly profited from aggressive recission practices. But if you think their actions would have been worse without the government and its regulatory framework, I would disagree. If it weren’t for the regulatory framework, many more people would see the truth:  the responsibility for these individuals’ actions lies with the individuals.

Would You Do Business with these People?

Committee chairman Bart Stupak polled the CEOs about their intentions for recission going forward.  All three refused to end the practice of recission, even if they could find no intentional fraudulent misrepresentation in the application. Two of the three CEOs cited compliance with state laws as their justification for the practice.

The video of this CEO testimony unfortunately did not capture the full quote from Brian Sassi, President and CEO of Wellpoint, who replied,

No, I can’t commit to that. The intentional standard is not the law of the land in the majority of states.*

The committee’s report described a November 15, 2008 letter from Stephen J. Northrup, Vice President of Wellpoint, which stated that his company “follows each state’s statutes and applicable case law as its standard for recission.”

I was relieved to learn that my insurance company was not among those cited in the committee’s report, and I have requested additional information from my insurer about their recission practices. I do not knowingly do business with people who refuse to take responsibility for their actions. Compliance with the law is no excuse.

More Government is the Cure for Bad Government?

The committee concluded their report by quoting the three insurance company CEOs who testified at the hearing. Each of these men stated his support for the U.S. government’s plan to require health insurance for everyone, and each claimed this reform would eliminate the need for recission. After reading this conclusion, I couldn’t help but wonder about the shared interests of the different parties in this hearing. It seems like insurance companies are hoping to benefit from all the new clients they’ll have if government makes insurance mandatory, and it seems like the committee members are hoping to benefit by broadening their authority and gaining votes from a popular issue. Meanwhile, the patients whose policies were rescinded continue to suffer and die.

What’s next?

Will “healthcare reform” solve the problems caused by the reprehensive practices of some insurance company employees? I don’t think so. Despite the length of most laws, and even with the best intent of most legislators, it is not possible for laws to cover every scenario that may occur. Laws are ineffective at best; most laws hurt more than they help the problems they’re intended to fix.

Laws are expensive—both financially and otherwise. They discourage individual responsibility and they help governments grow. This example from the healthcare insurance industry is one of many that follow a similar cycle.

How Can We Break the Cycle?

We can stop doing business with any person or company who uses compliance as an excuse to avoid responsibility for their business practices.

We can break the cycle each step of the way. I work in a highly regulated industry, and in the section below, I’ve italicized each step of the cycle, followed in plain text by the actions I take to break the cycle at that stage.

1.  Government passes a law and starts enforcing.

I ignore most laws. However, if I become aware of a law that’s likely to affect me or my business, I adapt my practices as needed to minimize government intervention. Meanwhile, I continue to do what I know is right, even if the law seems to prohibit doing so.

2.  Under the banner of “compliance,” individuals in businesses create processes and checklists designed to take away variances. This discourages responsibility and trust among individuals working in the company. People stop thinking about what to do as they follow company procedures.

When people around me stop thinking, I ask questions and raise awareness of consequences in order to provoke thinking and moral action.

3.  Some of these individuals begin engaging in business practices that coerce or harm others.

I am not aware of any coercive or harmful practices at my current company. But in general, when people try to use compliance as an excuse to justify evil actions anywhere, I take defensive action. Sometimes I also offer mutual aid to victims. Compliance is no excuse. In cases where someone didn’t realize the consequences of his or her actions, I help the person understand and take responsibility.

4.  People and media notice these actions, and they contact their government representatives.

Whenever I observe someone carrying out policies that I believe are wrong, I address my grievance to that individual directly or to someone else in their company if the individual is not known to me. Sometimes I enlist the support of allies. I do not ask government employees to intervene in my disputes or to “fix the system” for me.

5.  Government convenes hearings where CEOs testify that their companies engaged in horrible practices because the law allowed it.

If I become aware of any information about practices that I believe are wrong, I use that information and act accordingly through mutual aid to victims and/or through defensive action against the aggressors. I do not do business with people who use compliance to justify their disgusting and harmful business practices. I do business with people who have a history of responsible action.

6.  Government passes a new law and starts enforcing… and the cycle begins again.

I continue doing what I know is right, even if the law seems to prohibit doing so.

Please join me in breaking this cycle! I believe the solution lies in holding individuals responsible for their own actions, regardless of laws.


Episode #386 of the This American Life radio program included additional audio from this quote. Many thanks to Ira Glass and the crew at This American Life for bringing this hearing to my attention through their excellent weekly podcast.

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5 Responses

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  1. Abbie says

    Libby, this is yet another excellent essay that helps shed some light of the ideas of personal responsibility in light of current events. Essays like this help me communicate ideas with others. Thanks.

  2. Teresa says

    Thanks, Abbie. It’s inspiring to know that you found this post helpful for your communications about these ideas with others.
    ~Teresa, aka Libby

  3. sam kohen says

    Simple. A court order in any state to order the insurance company to honor the policy. No court would deny such an order, as to do otherwise would be in effect to pass a death sentence.
    Capital punishment is now rather rare.

    What is needed is a good, aggressive lawyer.

    In California, such actions have had the effect of basically halting this practice.

Continuing the Discussion

  1. Healthcare Insurance Companies Use Compliance To Law As A Justification To Drop Coverages (legal, premium) - Politics and Other Controversies -Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, P linked to this post on June 13, 2010

    [...] Healthcare Insurance Companies Use Compliance To Law As A Justification To Drop Coverages The practice is called recission. Healthcare insurers can drop people's coverage just when they need it most in order to save money and increase profits. They can claim compliance to the law as an excuse. A Nation of Laws -Liberty Snippet [...]

  2. downloads linked to this post on July 7, 2012


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