HOUSTON, Oct. 7, 2009 (GLOBE NEWSWIRE) -- Extensions, Inc. (Pink Sheets:EXTI) (www.ext.com), a Social Networking and Search Engine Development Company, today announced that its wholly owned subsidiary Newswire.Net, Inc. has released an investigative report titled "Dying to Make a Profit." The report can be found at www.newswire.net and may prove the undoing of public health insurance companies in the United States.
The authors succinctly summarize the nature of health insurance companies, recent court rulings on their responsibilities toward those they insure, and new SEC regulations and come up with some startling conclusions.
"Publicly traded health insurance companies owe a fiduciary duty of care to both their policy holders and shareholders. This dual responsibility creates a conflict of interest, which needs to be accounted for and properly disclosed," says Chris Ryan, co-author of the paper.
Authors Chris Ryan and Charles St-Onge begin by exploring the fiduciary nature of health insurance companies. Fiduciaries have special duties toward their clients that go beyond the simple "plain dealing" required of all companies. Someone who purchases insurance is in a fundamentally unequal relationship with the one providing insurance. The insured pays money to someone else on the promise that the provider will cover certain events which may or may not occur in the future. Since the quality of the insurance product purchased can only be "tested" years into the future, there is no "warranty period" during which one can return a product for a refund. Courts have ruled consistently that health insurance is insurance like any other, and the same fiduciary rules that apply to other insurers apply to health insurance companies as well.
Ryan and St-Onge document the ways in which health insurance companies have sought to avoid regulation by states, hiding behind federal laws meant to provide consistent national levels of service. Cases abound of health insurers interfering with medical decisions and dropping policyholders, all in an effort to promote stockholders' interests rather than those of the insured to whom they owe a fiduciary duty. Insurance companies were able to avoid liability for these actions largely because of the complicity of the courts. That ended recently, when the Supreme Court in Pegram v. Herdich ruled that health insurance companies could be held liable for interfering in a doctor's orders without any clear insurance policy directive to do so. In other words, unless an insurance policy made clear that a certain procedure was not covered; insurance companies could not refuse payment for the treatment.
This is where SEC regulations enter in. Publicly traded companies are required by law to file certain regulatory statements with the SEC, which are made available to the general public. One regulation, Section 401(a)-3.III.c, was introduced as part of the Sarbanes-Oxley reforms of 2002. The regulation states that "off-balance" sheet arrangements that may reasonably be expected to affect the company's bottom line must be reported. To neglect to do so can result in charges of omission of a material fact.
Ryan and St-Onge believe that health insurance companies have neglected to state the possibility of lawsuits from the insured as a contingent liability on their balance sheets.
Whether or not such neglect can be proved to be omission of a material fact is up to investigators to decide. But Ryan and St-Onge have raised an important question in the middle of the current American debate on health care: can health insurance companies be expected to look out for the interests of those they insure and their stockholders at one and the same time?
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