Health Insurance Industry "Racing to Defuse a Growing Furor Over Retroactive Policy Cancellations"
That was the lead line in a Wall Street Journal story on the recent health insurance policy rescission controversy. The controversy is over a health insurance company's right to cancel a health insurance policy when the insured made a misstatement on the original application.
Some insurers have held they can cancel a policy even when the misstatement was not material. For example, forgetting a physician visit for the flu and later being diagnosed with cancer as a legitimate reason for cancellation.
Sound like that sort of thing can't happen? Last week an arbitration judge awarded $9.4 million to a Health Net customer whose policy was canceled. The women's policy was canceled while she was being treated for breast cancer because she failed to accurately state her weight and a heart murmur problem. She claims that was all disclosed to her agent.
Earlier Health Net was found to be paying a performance bonus to the manager whose job it was to retroactively cancel policies.
The industry is now pushing a nationwide proposal to give policyholders the right to appeal retroactive policy cancellations to a third-party panel whose ruling would be binding. Some insurers aren't waiting for a deal with regulators and are doing it on their own.
The big question is why did it take so long and why did they take such a dumb position in the first place?
It was clear from day-one that this was one of the more stupid things the health insurance industry could do generally--and do specifically just as its fate is being debated in the presidential campaign.
But saying a third-party review is now needed is not enough.
The industry also needs to make it clear that health insurance policies will not be rescinded for things that were left off an application that were inadvertent and immaterial.
Related posts:
Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
California Insurers Lose a Big Court Case In the Health Insurance Policy Rescission Controversy
6 comments:
"But saying a third party review is now needed is not enough.
The industry also needs to make it clear that health insurance policies will not be rescinded for things that were left off an application that were inadvertent and immaterial."
I agree with you on this Bob and would like to see individual companies in the insurance industry take a stand to demonstrate that the wellfare of the patients is their priority. However, I doubt that this could ever truly be the case when the economy of health insurance is about...well...money.
I have had this exact experience twice in my career -- amazingly just before the end of the 2 year period of contestability, and when the member had some claims. Sometimes it's hard to tell if the insurers and their really are so insulated from the clients that they can be this incompetent, or if they have a secret desire to have the government take over risk and they can be TPAs. Either way, non-substantive omissions from applications should not be the bases for ploicy recissions.
In this specific instance, the misrepresentation was not material to the claim, but was material to the issuance of the policy. As horrible as the recission abuses have been on individual policies, this case seems to be a little different. The insured and agent did make a material misrepresentation on the application. It looks like the award was given due to this audit being started by another condition. Regardless, they did find the material misrepresentation and to the path of least resistence. I think the action should have been taken against the agent's E&O, or a possible charge of fraud by the applicant, but that wouldn't give us a headline. If a cop pulls someone over for suspicious activity and finds drugs, they are still busted, even if the initial suspicion turned out not to be a violation.
You are correct in pointing out the policy may never have been issued in the first place and that is certainly material.
I expect the big issue in this large settlement to the policyholder had to do with agent conduct.
Many Insurance companies still hide behind these tactics as a method to continue to "Cherry Pick" their risk portfolios. They still have rate structures and underwriting practices that preclude participation by virtually anyone born before 1950. And, even though they have access to all doctor records at the time of initial underwriting, they choose to wait until a claim is filed, then ask for records going back 10 years about anything. For older people who have had to leave their group plans; but, are too young for Medicare, this leaves an impossible situation.
Again, this is about trust, and nobody trusts insurers for many good reasons. That's why the Dems are pushing universal health care, which ultimately will lead to socialized medicine and a single-payer mess.
So we have incompetent math and actuarial geniuses messing up the health insurance industry, which probably doesn't bother them because they figure they'll be retired before the knife falls on the private health insurance industry.
Insurers' boards had better take a serious look at the kind of people they're hiring to run their companies. They need marketers at the top, not risk averse insurance experts who are so tone deaf they are destroying their companies and their industry.
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