In a Coma, With the Plug Pulled on Health Insurance
Family's Struggle Highlights Retroactive Decisions by Insurers, Employers
With her heart set on a career as a chef, Heather Galeotti enrolled
in a San Francisco culinary school. One winter night, her life took a
near-fatal turn when she was hit by a car. The 22-year-old lay in a coma
for nearly six months.
Galeotti's shaken family told the hospital that she was covered by
her father's health care plan with Kaiser Permanente. The hospital
confirmed her status with Kaiser and proceeded to treat her. Medical
bills piled up to more than $4 million.
Then in July 2007, five months into Galeotti's treatment, Kaiser
stunned the family with a
letter. The Galeottis would have to find another way to pay
the bills. Based on information received
from her father's employer, Kaiser said that the young woman's coverage
had not been in effect when she was hit.
"We were just blindsided," said her mother, Maureen Galeotti. "There
was no way we could afford it." The case was shifted to Medicaid, where
Galeotti's bills would have to be covered by taxpayers.
Ten months later, California insurance regulators
ordered Kaiser to cover Galeotti's care, saying that Kaiser
had no basis for denying payment "other than to achieve a significant
financial windfall" at the expense of her family, the hospital and the
state's Medicaid program.
Like many insurance disputes, the Galeotti case has its share of
miscommunication, bureaucratic wrangling and missing documents. But it
remains a stark example of a murky practice by some insurance companies
and employers - cutting off coverage retroactively for some patients
with expensive medical claims.
The new health care reform bill bans retroactive decisions by
insurers in policies sold to individuals, except in cases of fraud.
However, as it stands the ban would not apply to group policies, such as
the one held by the Galeotti family, which cover some 150 million
Heather Galeotti's story, reported here for the first time, came to
the Huffington Post Investigative Fund through its citizen journalism
project, which seeks to shed light on the inner workings of the
insurance industry. Former and current employees at Kaiser responded to
the Fund's online requests for help from insiders. Their tips led the
Investigative Fund to identify the Galeotti family and obtain records of
the case, including internal Kaiser e-mails.
Major insurers in California, including Kaiser, agreed
in 2008 to stop retroactively cancelling coverage - a
practice known in the industry as rescission. At the time, Kaiser
announced that it had not rescinded anyone's coverage since 2006. But
the new agreements and increased regulatory scrutiny only
applied to patients buying their own individual coverage, not
to group policies.
Even so, Kaiser may have violated state law in the Galeotti matter.
While declining to comment on an individual case, Lynne Randolph,
spokeswoman for the Department of Managed Health Care in California,
said that a retroactive cancellation of coverage through an employer is
"permissible only when the coverage is cancelled for non-payment of
premiums." The Galeottis continued to pay their premiums throughout
their daughter's medical crisis.
Despite the state
order, officials at Kaiser, the nation's largest nonprofit
health plan, continue to maintain that the insurer's actions in the
Galeotti case should not be considered a retroactive termination of
coverage. That's because -- according to Kaiser officials -- a month
before the car hit Galeotti, the employer's group plan notified the
family that her coverage had lapsed on Dec. 31, 2006. Kaiser was never
informed, so it initially agreed to pay the bills, Kaiser officials
said. However, that account is strongly denied by the Galeotti family.
The family's lawyer said they never received such a notice, and Kaiser
said it does not have a copy in its records. Lawyers for the group plan
declined repeated requests for interviews.
Kaiser acknowledged that it made an error by not paying Galeotti's
bills, but blamed the mistake on the late notification from the group
plan and "a lack of coordination" among departments inside the insurer.
Spokesman Won Ha pointed out that Kaiser provides approximately 40
million patient services each year and he described the circumstances
presented by the Galeotti matter as rare, with "no regular frequency
over the long run."
But because insurance companies are rarely required to report to
state or federal regulators how many times they have denied claims or
canceled coverage -- let alone to justify why - only the industry knows
Records and e-mails obtained by the Investigative Fund suggest that
retroactive decisions might not be isolated incidents in group plans. A
senior official in Kaiser's regulatory services, referencing the
Galeotti matter, wrote in a May
2008 e-mail to senior-level staff: "This type of case comes
to special services 3-5 times a month."
Peter Harbage, former assistant secretary for the California state
health department, said retroactive cancellations or denials should be
treated no differently in individual or group policies.
"Call it whatever you want. It's not different to the family," said
Harbage, now a health policy consultant and analyst for the New America
Foundation. "The family thought they had coverage. Their insurer told
them they had coverage, but then suddenly it's like they never had that
coverage, and they're left with the bill."
Harbage added: "If you're not safe in the group market with an
insurer as well-respected as Kaiser, then you're not safe anywhere.
There's no such thing as an isolated case."
The practice of retroactively cancelling individual health policies
garnered some national attention in 2008 when Rep. Henry Waxman
(D-Calif.), then chair of the House Oversight and Government Reform
Committee, held hearings that highlighted the consequences for patients
and their families.
The hearings followed a 2006 series in the Los Angeles Times, which
explored how insurance companies were looking for ways to cut costs
under pressure from shareholders, policyholders and the government.
In some cases, the newspaper reported, certain expensive
illnesses could automatically trigger an insurer to investigate whether a
patient should have been deemed eligible for insurance in the first
California health officials began investigating improper retroactive
cancellations after the newspaper reports, but only for people with
The state's managed health department recently declared that its 2008
agreements with insurers "to halt illegal rescissions have
been comprehensive, swift and binding." Still, some consumer advocates
and state lawmakers have questioned the strength of enforcement. A
recent report by the Institute of Health Law Studies at the California
Western School of Law found that fewer than 300 out of 6,000 people who
had been retroactively dropped by their insurer had been reinstated
under terms of the agreements.
The health care bill signed Tuesday by President Obama bans
rescission in individual health insurance policies, except when insurers
can prove fraud on the part of the policyholder.
Still, only about 14 million people hold individual health insurance
policies. Experts have argued that patients are more protected in a
group: There are usually no requirements for patients to fill out
medical history surveys and insurers do not want to risk angering an
employer and losing the entire group.
As the Galeotti case shows, however, even people with group policies
can be vulnerable.
A Question of Eligibility
San Francisco General Hospital admitted Galeotti on Feb. 27, 2007.
She had been run over by a large sport utility vehicle in an incident
that police described as a fight between two romantic rivals. "I was
conscious enough to hear my friend saying 'Don't die on me, hon, don't
die on me,'" Galeotti said in a recent interview.
At first, Kaiser informed the hospital that Galeotti was covered. Its
case managers closely monitored her progress and the cost of her
treatment. As a student, she came under the policy her father, a
custodian, held through the General Employees Trust Fund in Daly City,
Calif. Since the young woman was hospitalized she could not attend
classes at the California Culinary Academy, meaning that her coverage
would eventually lapse without an extension under the policy's
incapacitated child clause. The hospital encouraged the family to
contact the Trust Fund.
That is when the problems began.
In June 2007 the Trust Fund sent the Galeotti family a letter denying
the application, saying inaccurately that their daughter had already
graduated from school and was no longer eligible. The family appealed
the denial, saying that the graduation date had been pushed back because
she had taken medical leave -- a fact confirmed to the Investigative
Fund by school officials.
The Trust Fund did not reverse its decision. According to Kaiser, a
hospital social worker then mentioned to a Kaiser representative that
Galeotti's eligibility was in question. Kaiser contacted the Trust Fund,
which on July 23 sent the insurer a one-line
fax stating that Galeotti was "last eligible Dec. 31, 2006"
under her father's plan. Kaiser officials said that the Trust Fund told
the insurer that it had sent the family a letter in January alerting
them that their daughter was no longer covered and offering to let her
buy continuing coverage, but the family's lawyer said no such letter
Two days after receiving the one-line fax, Kaiser informed
the Galeottis that it had been directed to terminate the
young woman's health coverage, effective Jan. 1, 2007 -- almost two
months before she had been admitted to the hospital. Kaiser told the
family that if Galeotti wanted to restore her coverage retroactively,
she could buy into a new plan.
In interviews and in a written statement, Kaiser's Ha said it was not
up to the insurer to verify whether Galeotti should be covered. "The
group employer -- not Kaiser Permanente -- makes all decisions about
canceling or starting coverage for its plan participants based on its
eligibility determinations," he said.
The Trust Fund's lawyers declined comment on the Galeotti matter.
The Hospital's Complaint
The case would have stayed off the regulators' radar if not for
officials at San Francisco General.
Under Medi-Cal, the state's Medicaid program, the hospital was not
getting paid the full amount of its charges for Galeotti's care. So
hospital officials began exploring the reasons she was dropped by
Kaiser. They filed a complaint with state regulators.
For months, records show, the insurer debated Galeotti's coverage
with the state Department of Managed Health Care. In May 2008, after she
had been on Medicaid for nearly a year and was re-learning how to walk,
the regulators faxed a stern letter
to Kaiser, documenting her "improper termination." The
letter said, "Given the Plan's significant financial obligation to SF
General, and the fact that the Plan continued to receive premium on the
Family Account, Kaiser's motives... are suspect."
In September 2008, the insurer paid the hospital. The regulators did
not issue a fine.
Even with the payments from Kaiser and some coverage from Medicaid,
the Galeotti family said it still owes about $1 million for rehab,
medications and other fees.
For Galeotti herself, the recovery has been difficult. She has been
living with her parents and undergoing physical therapy since September
2007, re-learning how to walk and talk. "There are good days and bad
days," she said. "I still don't walk normally and I'll be in and out of a
wheelchair for the rest of my life. I'm frustrated. But I'm here."
Kaiser said it has made "minor adjustments" in its procedures to
avoid similar problems with processing claims. Spokesman Ha emphasized
that the Galeotti case involved an "unusual and complex sequence of
Still, he said, "Kaiser should have handled the processing of this claim better."