William J. Holstein

Is the Insurance Industry Red-Lining?
JUNE 27--This is a personal story, but it may have a broader national spin.

I received a call a few weeks ago from the Oxford unit of UnitedHealth Care informing me that the health insurance policy I was carrying for my wife and myself was being canceled as of August 1, 2010. This is the same policy that I took out last August 1 as a sole proprietor business in Westchester County, New York, which is a highly affluent northern suburb of New York City.

I said, I want to appeal. They said, There is no appeal. They had made the decision to no longer carry this kind of business in Westchester County, even though they are carrying it throughout the rest of the New York metropolitan area and Long Island. They said the decision last year to grant me the policy was just a fluke.

I went through the normal phone calls to 800 numbers. Your call is important to us and may be recorded for quality purposes. I spoke with new policies, renewals, all these different departments. But the message was the same--they were dropping me cold.

Needless to say, that set off a scramble to find new insurance, which we've been able to do. But one insurance broker offered a most intriguing explanation for what Oxford/United had done, which is this: There are relatively few hospitals in Westchester compared to the other parts of the NYC area, so those hospitals can command higher payments from insurance companies. This county, therefore, is not as profitable for the insurance companies as the rest of the area, where there are more hospitals that have to compete against each other more aggressively and where the insurance industry therefore can command higher profits.

So as the health care reform legislation is phased in, we know to watch the insurance industry for rate-gouging, but what about redlining? Are they in the process of shedding policies in certain geographies that simply are not as profitable as they want? That's common practice in other industries, but in the financial industry we call it one thing--redlining.