But Pete Rubi suffered a massive heart attack, and for more than a year now, he's been in a coma, dependent on others to look out for him, especially his wife, Ana Rubi. She is more than up to the challenge. Since April, she's been fighting Intergroup Prepaid Health Services to keep Pete alive, she says.
Intergroup wanted to terminate Pete's coverage at a skilled-care facility in Tucson on May 5. But Ana says Intergroup offered 30 additional days of coverage if she would sign a living will which would cut off her husband's food and fluids if it was determined he was in an "irreversible" coma.
"I said, 'What if I don't sign it?' They said, 'Well, then you don't get it.' I said, 'Well, then I guess I don't get it.' That's signing my husband's death sentence," Ana says.
Ana thinks Intergroup wanted her to sign the living will "because now more money is going out of Intergroup than going in," she says. "Before, he put all that money in there [into Intergroup]; now that he needs it, it's easier to get rid of him. Why bother with him?"
Ana believes Pete is coming out of the coma, and she's not about to give up on him. She has a referral from Pete's doctor for another six months in a skilled-care facility, and she plans on fighting Intergroup for her husband's due.
"He paid for that. And he's going to get it, or you know what? They haven't heard the last of me," Ana says. "Everybody says, 'You can't fight Intergroup.' I say, 'Why not?' They're just people like you and I. . . . They're not God. They think they are, but they're not."
Intergroup won't comment on Ana Rubi's complaint. But such clashes between managed-care companies and patients are one reason a group of state employees is protesting the award of a contract for indemnity health insurance to Intergroup. The employees say indemnity insurance, favored by people who need the most medical services, shouldn't be trusted to a company which makes people fight for treatment. They point out that when Intergroup first tried to manage state workers' indemnity coverage four years ago, the state departments of Insurance and Administration tagged it with the largest fines in state history for an HMO.
Intergroup says it's more than qualified to deliver quality indemnity care now, and the state Department of Administration, which awarded Intergroup the contract, says there's nothing wrong with Intergroup's bid. However, problems exist:
* Mary Ann Knight, manager of the state's employee-benefits program and the person who made the request for bids, admits she's married to an Intergroup account manager--but insists there's no conflict of interest.
* New Times has learned that doctors are quitting Intergroup, which may affect its ability to meet the terms of the contract. In 1995, Intergroup lost 142 primary-care physicians. In the past nine months, at least 75 more physicians have left or given notice to leave the physicians' association which contracts with Intergroup to provide doctors--a turnover rate of 22.9 percent since 1995. More are expected to give notice.
* The Department of Administration, faced with criticism over the selection of Intergroup, attempted to make Blue Cross a co-offerer of indemnity insurance three months after choosing Intergroup. Blue Cross is challenging the legality of that move.
* Members of the legislative oversight committee--established in response to the furor created the last time Intergroup held the state indemnity contract--say DOA never notified them of the awards, as required by law. DOA says the lawmakers were notified. At the request of Senator Ann Day, a Tucson Republican, the attorney general is looking into the matter.
* Intergroup lost more than $3 million last year, according to records on file with the state Department of Insurance. And a former assistant medical director of Intergroup says the company will also lose money with its indemnity bid.
* DOA and Intergroup officials reportedly told state employees that the company had no new complaints since Intergroup was bought by Foundation Health Corporation, Inc. In fact, hundreds of new complaints have been lodged with the Department of Insurance.
DOA says there's no cause for state employees to worry, and some say Intergroup deserves the contract.
But there's a vocal group of state employees that says it's heard that before--and it's not buying it this time.
On May 21, the state Department of Administration held a meeting at Arizona State University to inform staffers of the selection of a new indemnity carrier and new HMOs for an annually renewable, five-year contract for employee benefits.
Mary Ann Knight, employee-benefits manager for the state of Arizona, and Jerry Kertesz, vice president of sales and marketing for Intergroup, announced that Intergroup again had been chosen as the state's indemnity carrier.
Harvey Smith, a math professor at ASU, was surprised, to say the least.
"I don't have anything against Intergroup," he says, "except that they screw up all the time."
The state had awarded Intergroup the contract to provide indemnity coverage to state employees before, in 1992. Smith fought to have Intergroup removed.
Though only about 10 percent of the state's 50,000 employees opt for indemnity coverage, it generates a lot of controversy.
Thanks to health-maintenance organizations (HMOs), indemnity coverage is almost obsolete. Basically, indemnity works the way health coverage used to work, and the way most other forms of insurance still work. The insurance company agrees to pay most of the cost of health care--usually around 90 percent--while the insured pays the premiums and whatever's left over. The insured person is indemnified (freed) from the majority of the cost of health care while enjoying much greater freedom in selecting physicians, clinics and hospitals. Premiums for indemnity plans are significantly higher.
It's difficult to control the cost of indemnified care, because there's no incentive for doctors to limit treatment. What patients need--and, critics argue, often what patients don't need--they get.
HMOs were a response to this type of coverage; physicians are paid a set amount per patient, regardless of what treatment is needed. This is supposed to discourage unnecessary care.
Which is great, as long as you're healthy.
But if you're a person who needs to see a doctor a lot--or if you just don't want to stay within the limits of an HMO--HMOs don't work so well.
That's why about 5,000 state employees are now on the Blue Cross/Blue Shield indemnity plan. For one reason or another--they require regular testing, they have a chronic condition--an indemnity plan better meets their needs.
In 1992, however, DOA couldn't resist a little penny-pinching with the indemnity plan, and gave Intergroup a chance to manage it.
It was a disaster. Hundreds of complaints were filed with the state Department of Insurance over Intergroup's failure to pay claims. Many employees paid health-care costs out of pocket when Intergroup denied their claims--something that's not supposed to happen with an indemnity plan.
Harvey Smith and his wife, concert pianist Ruth Kolb Smith, and University of Arizona professor Jacqueline Sharkey led the American Association of University Professors in taking their case to regulators, the media and the Legislature. They were featured on CNN, and a special Legislative Oversight Health Insurance Benefits Review Committee was formed to address their concerns.
The protesters won. In 1993, Intergroup was fined $51,839 by the Department of Administration and $57,480 by the state Department of Insurance for not paying claims. An Intergroup spokesperson admitted that the company hadn't been ready to handle the business. Blue Cross/Blue Shield of Arizona was selected as the state's indemnity carrier in 1994.
This was hardly crippling for Intergroup. Since the company was established in 1980, it's gone from a small regional firm to the largest HMO in the state aligned with a national powerhouse. In 1994, Intergroup was purchased by the San Diego-based Foundation Health Corporation, the nation's fourth-largest managed-care company. The buyout was covered in the pages of the Wall Street Journal and the New York Times.
Intergroup, which is based in Tucson, also has drawn national attention for its ability to maintain profits while boasting high customer satisfaction on surveys. Even after the fine, Intergroup retained the insurance contract for retired state workers, as well as being one of several HMOs state employees may choose. Currently, 43 percent of state employees are members of Intergroup's HMO.
Still, Smith thought he'd seen the last of Intergroup as an indemnity carrier. At the meeting at ASU in May, that assumption was shattered.
In its bid, Blue Cross had doubled its indemnity premiums for 1997-98, and Intergroup had come in significantly lower. In 1996-97, the monthly employee contribution for Blue Cross/Blue Shield's indemnity had been $55 for a single person and $167 for a family, which, combined with the state's contribution, equaled total premiums of $215 for an individual and $341 for a family.
But for 1997-98, the out-of-pocket premiums shot up to $110 single and $307 family, totaling $256 single and $608 family with the state's contribution. Intergroup offered employees indemnity premiums of $23.32 single and $128 family, which totaled $169 and $430 after the state kicked in--less than Blue Cross' 1996-97 cost. Based mainly on the price, the state chose Intergroup.
The Smiths thought it odd that the state seemingly had forgotten about Intergroup's track record. (Intergroup apparently had, too; on its bid for the state contract, the company answered "No" when asked if it ever had had a "financial penalty imposed for not meeting a certain guarantee.")
At the meeting, Smith recalls, "He [Kertesz] said, 'We really screwed up before, we admit it was totally mismanaged, but now we're prepared.' He said, 'We've got this dedicated 800 line, we have new software to handle claims.' We asked him how many people [non-state employees] were covered under their indemnity plan already . . . and he told us about 15,000 or 20,000."
Kertesz did not respond to requests for an interview or questions faxed by New Times.
Intergroup spokeswoman Donna Kreutz says a lot has changed since Intergroup last provided indemnity. In addition to the buyout by Foundation, all of Intergroup's top executives are new, and most have experience with indemnity products, she says. Also, a 1995-96 DOA audit of Intergroup, conducted by the Segal Company, found Intergroup achieved 99 percent accuracy levels on its claims processing.
Kertesz's reassurances didn't mollify the Smiths; they didn't want Intergroup. Harvey Smith says that when Knight was asked if there was any way to change the decision, she said, "'This is absolutely set in concrete, there's no way you can change it.' We asked, 'No way?' And she said, 'Well, you can go to the Legislature if you want to.' And Ruth said, 'Okay, I will.'"
Knight refused to comment for this article.
But after the professors began raising hell--calling reporters, legislators and the governor--the state reversed itself. On June 10--three months after Intergroup was awarded the bid--DOA told the professors that Blue Cross would share the contract.
In a May 2 letter, DOA had told Intergroup that state employees currently on Blue Cross' indemnity plan would automatically go into Intergroup's program. But on May 29, Intergroup wrote to the state Procurement Office and proposed sharing the indemnity contract with Blue Cross. On June 10, the state formally agreed to Intergroup's proposal.
Blue Cross officials balked, saying they first heard they would share the contract from a DOA press release.
In a letter received the same day, DOA informed Blue Cross that the state has a right to award multiple contracts for up to 120 days after the bidding deadline.
Blue Cross has since filed a protest, saying it didn't intend to offer coverage in concert with another insurer and disputing the state's interpretation of the 120-day clause. The protest was rejected by the Procurement Office, and it is now before DOA director Rudy Serino. If Serino also rejects the protest, it will go before an administrative law judge.
Smith and others at the May 21 meeting say Intergroup VP Jerry Kertesz told them that Intergroup had no new complaints against it. But the Department of Insurance has a hefty file of complaints lodged against Intergroup since it was sold to Foundation.
The company has racked up 250 resolved complaints in the past three years. Intergroup has paid $238,778 to settle those claims. The company's position was upheld only 46 times out of the 250 closed disputes.
By way of contrast, the $57,480 fine imposed on Intergroup involved about 200 complaints.
Most of the complaints aren't as serious as Ana Rubi's, but there is no doubt that some of Intergroup's customers are frustrated.
Take, for instance, the letter from the parents of Nico Lorenzen, a 3-year-old who needed tubes in his ears. It's a common procedure for kids with chronic ear infections, and the Lorenzens' pediatrician recommended it. But their claim got stuck in Intergroup's system for five months.
The Lorenzens' pediatrician recommended they file a complaint with the Department of Insurance. They did, and the procedure was approved.
Lisa Lorenzen, Nico's mother, says she's remained with Intergroup because she likes the doctors, but she doesn't know why the surgery was ever denied.
"One day, they said, 'Absolutely not,' and the next, they said, 'Sure, why not?' I just didn't understand," she says.
Some of the complaints are almost comical. One Intergroup claims processor had trouble getting her employer to pay her claim until she complained repeatedly to state regulators.
"I have to, through gritted teeth now, reassure Intergroup patients every day that they have not made a mistake in selecting Intergroup as their health-care insurer," Monica Thomas wrote. "Intergroup is an excellent health insurer, but how can I confidently assure Intergroup patients that Intergroup really cares about them when Intergroup doesn't care about me--and I'm a patient myself!"
Intergroup also has far fewer people on indemnity plans than the 15,000 or 20,000 the Smiths say they were told. According to Intergroup's bid for the state contract, only 108 people in Arizona (of 47,383 Intergroup customers at the time) are covered by Intergroup's straight indemnity plan. The rest are enrolled in HMOs.
These aren't the only things that concern the Smiths. It's the little things as well; when Harvey Smith tried to call the 800 line "dedicated" for indemnity, the operator didn't know what he was talking about, he says.
"Now he's [Intergroup's Kertesz] contrite, but he lied to us, same as last time," Smith says.
"I'm a pretty healthy person," Smith adds. "This isn't for my part so much. I'm just a 'worried well.'"
Intergroup won't comment on individual cases. But the company points out that its membership has grown, from 41,279 to more than 50,000 members in the past four years. Intergroup is also accredited by the National Committee for Quality Assurance, a board which reviews HMOs nationwide. And the firm's spokeswoman, Donna Kreutz, cites state surveys which show customer satisfaction with Intergroup at 87 percent and 92 percent in its northern and southern regions, respectively.
But those figures are for Intergroup's HMO. What Kreutz doesn't mention is that another DOA study of Intergroup's indemnity plan found that 31 percent was dissatisfied with the program. By comparison, only 5 percent of Blue Cross/Blue Shield's customers was dissatisfied with its indemnity product.
Consumer's Checkbook magazine, published by the Center for the Study of Services, ranked Intergroup along with other Arizona health plans--CIGNA, FHP, Humana, and Partners--in 1996. Its survey found that 87 percent of respondents did rate Intergroup good or better for overall quality. But Intergroup's scores for specific care issues--the ones most likely to affect people who need lots of service, as opposed to the healthy majority in HMOs who rarely ever use its benefits--were mainly in the 80s and 70s. Intergroup also had the highest "disenrollment"--27 percent, more than double the nearest competitor.
The highest-scoring health plan in the survey was CIGNA HealthCare of Tucson, which scored a 90 on overall care and mainly in the 80s on specific care issues.
Still, Kreutz says Intergroup's growing enrollment is a testament to the plan's quality. "When given a choice, people vote with their feet--and every year more people are walking towards Intergroup, not away," she states.
However, Carol Long, an assistant professor at ASU and a registered nurse, walked away from Intergroup--once she was finally able to walk.
Long testified before the Legislature in 1993 about her problems with Intergroup Prepaid Health Services, which refused to pay for her hip-replacement surgery. Only 40 at the time, Long suffered from a degenerative hip condition which made walking so painful she had to limit the number of steps she took each day.
Intergroup told her to wait until she was 65, when the procedure would be covered by Medicare. Until then, she was supposed to tough it out, she says. After she testified, Intergroup reversed itself and paid for the operation--but not before Long had racked up significant out-of-pocket expenses and suffered a great deal of avoidable pain.
"You wonder, how the hell did that happen?" Long says. "It's like they snuck in again. All the media coverage, all the publicity, and they snuck in again.
"We were outright lied to. It's the maiden voyage of the Titanic, as far as I'm concerned."
Cranky customers aren't the only potential problems with Intergroup's receipt of the contract. Since patients are charged more under Intergroup's indemnity plan if they use an out-of-network physician, it's important that they have access to contracted doctors.
But doctors are leaving Intergroup in significant numbers. According to internal reports obtained by New Times, some 75 physicians have left or given notice to leave one of Intergroup's major contractors in the past nine months. Combined with Intergroup's earlier numbers, that's at least 222 physicians who've left Intergroup since 1995, out of a primary-care pool of 967--a turnover rate of 22.9 percent.
Intergroup says its physicians' network is larger than required by Medicare and Arizona statutes, and that its contractor will recruit new doctors to replace those who resigned. "We have the doctors needed to serve the state contract," Intergroup's Kreutz states.
Intergroup posted a net loss for 1996 of $3,081,025--down from a $26 million profit in 1995. Kreutz explains that the rising cost of health care--Intergroup's medical costs increased by a staggering $100 million from 1995--as well the FHC merger, caused the loss. She says it's a one-time occurrence.
That's troublesome, because a former assistant medical director of Intergroup, now in his own practice, says Intergroup will lose money on its state indemnity contract because the bid was unreasonably low.
"I'm not saying they won't be able to deliver the care," Dr. Bradley Gordon says. "But they cannot do it for that amount of money. They'll just have to make up the money someplace else."
If Intergroup's profits continue to decline, then there will be fewer places for the company to make up the difference on its indemnity.
Gordon thinks the state should've been wary of Intergroup's bid.
"If you get a bid on a construction project that was extremely low, you say to the bidder, 'How can you do that?'" Gordon says. "I seriously doubt the state asked Intergroup, 'How can you do that?' They were probably too busy salivating at the numbers."
While the amount of drool Intergroup's bid generated isn't known, the state says it doesn't have to look too deeply.
Intergroup made the bid, and it's obligated to meet it, DOA spokesman Howard Boice says. "There are provisions to ensure that they meet their obligations," Boice says. "This time it [the contract] was written with a lot more guarantees."
Without providing details, Intergroup's Donna Kreutz maintains the bid is a reasonable one.
Protesting state employees are concerned that Mary Ann Knight, DOA's employee-benefits manager, is married to Richard Knight, an account manager for Intergroup.
"She [Knight] serves on the legislative oversight committee for health insurance as DOA's representative," Harvey Smith says. "She was responsible for writing the RFP [request for proposal, seeking bids]. She supervises two people who were on the [bid] evaluation committee. . . . I'm not saying she has a conflict, I'm no lawyer, so it's not for me to say. But it beats me how she avoids one."
The Department of Administration isn't long on explaining how Knight avoided impropriety, either.
"Mary Ann Knight had no conflict of interest," DOA director Rudy Serino wrote in a terse response to questions from New Times. Serino maintains that the Attorney General's Office already has investigated the possible conflict and cleared Knight.
Howard Boice, public information officer for DOA, puts it even more succinctly: "Oh, bullshit," he says. Boice says the fact that Mary Ann Knight is married to an Intergroup account manager is "irrelevant" and that DOA has taken steps to avoid any impropriety.
Richard Knight has been employed by Intergroup since February 19, 1996. On August 13, six months after he started, Mary Ann Knight wrote her superiors to formally notify them of a potential conflict.
"The fact that my husband works for Intergroup has not been kept a secret. Upon his acceptance of employment, I advised you and I contacted each of the State's contracted vendors individually and advised them. It is unfortunate that at that time I did not initiate this formal letter," she wrote.
Boice says the attorney general was notified, and his office gave a thumbs-up.
"This was a case where there was a potential conflict," Boice says, "and it was taken to the attorney general and asked, would this constitute a conflict of interest, and the attorney general advised that it would not."
But the AG's opinion did not include an inquiry into the Intergroup bid. Boice says since Knight didn't serve on the DOA evaluation committee, there was no problem with the bid process. (Knight does supervise two DOA staffers who served on the evaluation committee and another who supplied data to the committee.)
"She was not involved in it [the evaluation process]," Boice says. "Just because she works for the state in the benefits thing [department] does not mean her husband should be prohibited from gaining employment."
What, then, would constitute a conflict of interest?
"That's a hypothetical," Boice replies. "You can't expect me to get into that."
Arizona's statute on conflicts of interest states, "Any public officer or employee who has, or whose relative has, a substantial interest in any decision of a public agency shall make known such interest in the official records of such public agency and shall refrain from participating in any manner as an officer in such decision."
DOA has no written opinion by the AG's Office sanctioning its position--Boice says DOA Human Resources director Bill Bell discussed it in a phone call. Currently, the attorney general is looking into the bid to see if there are any issues of conflict, and because of the complaints from Senator Ann Day that the legislative oversight committee was left out of the process, according to spokeswoman Karie Dozer. DOA says it gave the committee all the necessary information about the bid at a meeting during the regular legislative session.
However, a May 24 memo from Mary Ann Knight regarding the bid awards contradicts that claim. According to the memo, contracts were awarded on March 18. She writes that the legislative committee was notified on March 17. However, there was no meeting of the committee on March 17. The committee did meet on March 24--the day letters notifying contractors of their awards went out--and held an executive session during which Bill Bell briefed the committee on the awards.
Despite Mary Ann Knight's claim that all state contractors knew about her husband's position, Blue Cross officials say they were never notified by DOA. The university employees didn't know, either, and Knight was clearly not pleased when they found out.
A transcript of a June 16 meeting--which was taped--between professors and DOA officials captures the confrontation between Knight and professor Jacqueline Sharkey.
"I filed a statement with the attorney general, and there was nobody in the city that doesn't know that my husband works for Intergroup, and I take extreme offense to what you're saying," Knight says. "Where do these questions come from? That's what I want to know."
"Just people calling us," Sharkey responds.
"Just people. All the phantom people," Knight says. ". . . Yes, I love this, this is the same phantom people who have complaints all the time."
Such exchanges have the professors convinced that DOA is protecting Intergroup, despite its track record. "Let's just say we have not had a lot of cooperation from state officials," Sharkey says.
The professors say they've been rebuffed in their attempts to see public documents, that they've been treated rudely by DOA officials, and misled by DOA staff.
Also, the professors claim, every time they bring up Intergroup, someone from DOA tries to switch the subject to Blue Cross. As an example, they point to a statement at the June 16 meeting by DOA's Bill Bell:
"You know," Bell says at the meeting, "we've spent a lot of time on Intergroup, and that's fine . . . but it bothers me that Blue Cross has provided an indemnity program to the state for the last several years, but no one has ever asked the question, why would Blue Cross . . . choose to raise their rates by such an enormous amount this year."
DOA officials say they're not hiding anything or favoring Intergroup in any way.
But they are treating inquiries like toxic waste. Through a secretary, Knight told New Times she'd been ordered not to discuss the matter. The other DOA employees involved in the bid did not return calls for comment. Mary Ann Knight's husband, Richard, hung up when reached by phone.
There is a case to be made that Intergroup won the bid fair and square. Brad Kirkman-Liff, an ASU professor who served on the evaluation committee, says the previous problems with Intergroup led him to be cautious about Blue Cross/Blue Shield on this go-round.
"As volatile as the health market is today, you can't really rely on past performance," he says. "The company you've dealt with for years might not be there next week . . . you have to rely on guarantees of future performance."
Blue Cross was unwilling to give those assurances at first, Kirkman-Liff says, and the firm doubled its indemnity premiums. Given the cost and that concern, he opted for Intergroup. He was joined by evaluators who work for outside health-care consulting firms, as well as the DOA employees on the committee.
Indemnity is expensive, and the bottom line is Intergroup offered to do it cheaper, which may be the only real reason it got the contract.
"If you want to put the best face on the state's efforts, it could've come down to Intergroup or nothing," Jonathan Rose, a professor of law at ASU, says. "And if it was nothing, then people would've really screamed."
Rose thinks it's a question of whether the state should provide the kind of plans its employees want.
"The employer can't force people to bid, and indemnity is a product that seems hard to make money on," he explains. "And there are lots of people who can't afford anything other than an HMO. But you also have a lot of people who want and can afford more, and the state has to find a balance."
Rose thinks the way the state currently determines its employer contribution inherently favors HMOs.
"If you want to make [other options] available, you need to get the state and the insurance companies together and ask them how to get incentives to bid different kinds of products," he says. "But the current policy of the state makes that unlikely.
"In the long run, it's more important to solve that problem," Rose says, because he believes the state is obligated to give employees an affordable choice as long as it's feasible.
In the short run, however, Harvey Smith thinks the entire bid process needs to start over. Any plan that includes Intergroup is not acceptable to him.
"I don't know why, but there does seem to be a great devotion by Bill Bell and company to Intergroup," he says. "It got to the point last time [during the earlier problems with Intergroup] that I'd send a letter to DOA and get a reply from Intergroup. There's something there, I don't know what it is. It may just be love.
