In a Coma, With the Plug Pulled on Health Insurance

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 Americans.

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.