Insurers Defend Canceling Private Coverage Over Errors
USA Today on Monday examined how insurance companies can retroactively reduce coverage or cancel private policies if they find omissions on applications "sometimes long after the policies are issued." According to USA Today, "Reasons for the revocations vary," but "[m]ost of the time, the decisions involve disputes over what the policyholder disclosed, or did not disclose, on the insurance application."
In some cases, insurers revoked policies because patients did not disclose tests that ruled out a condition or a known collection of symptoms that had never been diagnosed. "Intentionally lying on an application is clearly a revocable offense, but not all disputes are that clear-cut," USA Today reports.
Even if insurers do not thoroughly check medical records prior to issuing the policy, they can "'look back,' sometimes for a decade or more," to check facts on a policyholder's application, according to USA Today. Insurers say their detailed application process and right to rescind policies are necessary to prevent fraud.
However, industry critics say the practice is used too often.
Jamie Court of the California-based Foundation for Taxpayer and Consumer Rights said, "The newest tool insurers have found is to check into every sick person who files an expensive claim to see if there's an argument that they lied on their enrollment application."
The practice happens most frequently with private coverage because "there are generally fewer protections against pre-existing condition exclusions" that are limited by state law for other types of policies, USA Today reports. Some patients who were left with high medical bills after coverage was rescinded have filed lawsuits against insurance companies, some of which have been settled.
Lawmakers in California and Connecticut are considering imposing regulations on insurance companies to limit the practice.
Connecticut Attorney General Richard Blumenthal (D), who has proposed legislation that would require state insurers to prove that applicants intentionally lied on their applications, said, "The insurance companies are gaming and manipulating the system. The effective way to protect individuals is to change the law."
However, Blue Cross of California spokesperson Shannon Troughton said, "The issue here is how infrequently this happens," adding, "Rescission is an important tool to protect against fraud. Fraud drives up costs for members and the health system in general" (Appleby, USA Today, 1/29).
KCET's "Life & Times" on Monday is scheduled to profile a woman "who was left without coverage after an expensive operation" when her health insurance policy was cancelled (Louie, "Life & Times," KCET, 1/29).
A transcript and audio of the segment will be available online after the broadcast.