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Insurer ends health program rather than pay out big

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Ian Pearl has fought for his life every day of his 37 years. Confined to a wheelchair and hooked to a breathing tube, the muscular dystrophy victim refuses to give up.

But his insurance company already has.

Legally barred from discriminating against individuals who submit large claims, the New York-based insurer simply canceled lines of coverage altogether in entire states to avoid paying high-cost claims like Mr. Pearl's.

In an e-mail, one Guardian Life Insurance Co. executive called high-cost patients such as Mr. Pearl "dogs" that the company could "get rid of."

A federal court quickly ruled that the company's actions were legal, so on Dec. 1, barring an order by the federal Department of Health and Human Services, Mr. Pearl will lose his benefits.

His medical treatment costs $1 million a year.

Most of that is for 'round the clock, in-home nursing care - for operation of his ventilator, hourly breathing treatments and continuous intravenous medication.

(Corrected paragraph:) A Guardian spokesman said policies such as Mr. Pearl's - which offered unlimited home nursing - had simply become too expensive for new small-business customers to buy, and that even Medicaid and Medicare do not cover 24-hour home nursing. His parents, Warren and Susan Pearl of Fort Lauderdale, Fla., said their health insurance premiums had risen over the years to $3,700 a month.

As a last resort, Mr. Pearl would be admitted to a state hospital under Medicaid. But the Pearls consider that a death sentence.

"Ian would be lucky, or unlucky, to survive more than a matter of weeks or months," Mrs. Pearl said. "One-on-one skilled nursing is essential."

Her husband, 60, a wealthy businessman, said the couple have enough savings to pay for their son's care for a few years, and after that, they could mortgage the family's home.

The Pearls' younger son, Matthew, is the best-selling author of "The Last Dickens," a novel published this year by Random House.

"Ian and Matt spend hours on the phone discussing story lines. Matt uses Ian to bounce ideas off of," Mrs. Pearl said.

Ian Pearl became the first wheelchair-bound pupil to be mainstreamed in the Broward County elementary schools, and he was elected president of his high school class at University School of Nova Southeastern University in Fort Lauderdale.

He has Type II spinal muscular atrophy - which often kills victims in infancy. He grew to adulthood only to suffer respiratory arrest at 19. He has required a tracheal tube ever since.

He has been fortunate most of his life to be covered under the Guardian small-business health plan his father bought through his remodeling company, Warren Pearl Construction of New York City.

Generous by modern standards, the health insurance plan covered home nursing, something most small-business plans do not cover today.

Over the years, Guardian has scaled back the benefits in new types of plans it has offered, to the point where it no longer offers in-home nursing coverage.

In the state of New York, where Mr. Pearl's business operates, 54 other employers offered the Guardian plan. Their policies covered nearly 500 employees and dependents, including two other severely ill people.

The Pearls moved to Fort Lauderdale 30 years ago because the humidity there is beneficial to their son. Warren Pearl has commuted back and forth from New York every weekend since.

He said Guardian has for years used private investigators to find pretexts to deny coverage. An investigator came to their door, he said, to get proof that he does in fact fly back and forth to New York and that his two-employee company really operates in New York. Investigators went to Mr. Pearl's job sites.

"The insurance companies are cheating in order to have obscene profits," he said.

Guardian, a 150-year-old mutual company, reported profits of $437 million last year, a 50 percent increase over $292 million in 2007. It paid dividends of $723 million to policyholders and had $4.3 billion in capital reserves, according to its annual report. The company's investment income totaled $1.5 billion that year, a small increase from the year earlier.

The insurer also canceled similar policies in New Jersey and South Carolina, and earlier ceased offering any health plans in Colorado, but did not cancel all of the policies in every state in which they were offered, said John Fried, the Pearls' attorney. The company took the action only against those plans where claims were highest, he said.

The insurer discontinued the coverage late last year, but was required by law to continue paying for Ian Pearl's care for another year.

In 2006, Guardian began an initiative called Moving Forward, which was "designed to increase Guardian's competitive position by reducing what it paid out in claims," wrote Judge William Pauley, of the U.S. District Court for the Southern District of New York, in his summary judgment in Guardian's favor in July.

The move would help the company lower overall rates to compete better for more business.

The judge found that the company had not violated the Employee Retirement Income Security Act (ERISA), because it canceled entire policy lines. The Pearls also claimed Guardian violated the Health Insurance Portability and Accountability Act (HIPAA), but the judge found that only HHS can enforce that law and that private citizens cannot sue under it.

The Pearls appealed to HHS under the Bush administration and were told the agency could do nothing, Warren Pearl said.

They petitioned again in a letter to HHS Secretary Kathleen Sebelius on Oct. 5, with support from their congresswoman, Rep. Debbie Wasserman Schultz, Florida Democrat, but have not heard back.

Contacted by The Washington Times last week, the agency said, "Our Department has been contacted by the Pearl family and we have heard their very serious concerns. We are actively investigating this matter."

The House Energy and Commerce Committee, chaired by Rep. Henry A. Waxman, California Democrat, is also investigating, the Pearls said. The committee held hearings on benefit cancellations earlier this year.

Spokesmen for Mr. Waxman and Ms. Wasserman Schultz did not respond to requests for comment.

In an e-mail to four other Guardian executives entered into evidence in the Pearls' suit, company Vice President Tim Birely discussed how the company could "eliminate this entire block to get rid of the few dogs."

He concluded, "Paul [Saylor], keep in mind that my intent is to be as narrow and laser-like as possible. We may need to broaden some things in NY due to state of domicile and some historical [nonsense] with some of these policyholders."

Asked about the use of the phrases such as "get rid of" and "dogs," Guardian spokesman Richard Jones said, "I'm not aware of any language related to any of the things that you just mentioned, no."

He said plans such as Mr. Pearl's had simply become too expensive to market to employers.

"We certainly sympathize with [Mr. Pearl's]'s condition. As a business, though, we have to offer plans that enough customers want," Mr. Jones said.

"But in this particular case the expense of the plan meant that most small businesses were not able or were not willing to purchase it. As a result we started offering different plans," he said.

"This has been through the courts. Guardian's activities were upheld by the courts as well as by the New York State Department of Insurance.

"We certainly don't think this particular case has anything to do with health care reform," Mr. Jones said.

Mr. Fried argues in his appeal that Judge Pauley misinterpreted the ERISA law.

"I think we're entitled to a trial as to whether Guardian's discontinuation of its policy was in effect discrimination against Ian Pearl," he said.

The Pearls say they are out for justice.

"This is a matter of life and death for my son," Warren Pearl said. "I have to have faith that HHS will enforce the law.

"This is attempted murder, as far as I'm concerned. They targeted us, they never expected to get caught. I believe that justice will prevail."

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