Health Insurance Rescission and How To Fight It
Health insurance rescission is the practice of rescinding (canceling) health insurance coverage of clients due to misrepresentation or fraud.
However, what sounds like a perfectly reasonable practice designed to protect insurance companies against clients who knowingly misrepresent their state of health has become subject to rampant abuse by those same companies.
Often what health insurance rescission means in practice is that insurance companies cancel the insurance coverage of clients in good standing when they become seriously ill, at the very moment they need coverage the most, on the flimsiest of grounds.
An investigation by the House Subcommittee on Oversight and Investigation recently found that the three of the largest insurance providers in America, WellPoint, Assurant, and Golden Rule, had rescinded 20,000 policies in the years from 2003-2007 in California alone, saving themselves an estimated $300 million dollars in what the industry terms "medical-loss," the industry term for the cost of actually paying for clients' health care.
Not only that, the investigation discovered that WellPoint had actually rewarded employees for canceling the coverage of sick patients. One employee of Blue Cross Blue Shield, a subsidiary of WellPoint, had single-handedly saved the company $10 million in policy rescissions.
These policies were often rescinded on the flimsiest of excuses.
The House Subcommittee on Oversight and Investigation found that several companies had lists of more than 1000 conditions that would cause a client's policy to be flagged for possible rescission, even if the client had paid all premiums fully and on time. Once flagged, insurance companies would search through the policy holder's application looking for errors and omissions. One blogger has estimated that the probability of being rescinded for patients who file claims for serious, expensive conditions such as cancer may be as high as 50%. Some cases are rescinded after pre-certification for a life saving procedure or treatment has already been issued.
A California woman lost hers because her doctor had flagged her file on suspicion that she had polycystic ovarian syndrome without mentioning his suspicions to her.
A Texas woman battling breast cancer lost her coverage because she failed to note a treatment for warts on her application. (It was later reinstated after she took the company to court.)
My own aunt was a victim of rescission in the early 90's, when she was diagnosed with leukemia. Her insurance company dropped her coverage and she was forced to pay for her treatment out of pocket. Fortunately, she and her husband were well-to-do and able to afford to do so. I have little doubt that she would be dead today if they had been poorer. She was only in her early 30's when she was diagnosed.
Even after being confronted with stories such as these at a congressional hearing, three insurance company executives flatly refused a request by Michigan Congressman Bart Stupak's to commit to using rescission only in cases where they could prove intentional fraud.
What To Do If Your Coverage Has Been Rescinded
Rescission leaves a bad taste in juries' mouths, so insurance companies are often willing to settle for large sums of money when a client with a suspicious-looking rescission decides to fight back. Another advantage that former policy holders have in some states is that the insurer may be required to prove intent to deceive, which can be difficult.
If your coverage has been rescinded, the first thing you should do is contact the claims department of your insurance company and ask for a complete explanation of the company's reasons for rescinding your policy in writing.
If you believe your policy was rescinded unfairly, contact your state's Department of Insurance. The DOI employees will be able to offer you advice and in some cases may even file a complaint on your behalf. In other cases, it may be necessary to hire a lawyer.
A lawyer can help you file suit against the insurance company to force it to reinstate your policy or pay damages. In these suits, the primary burden of proof is generally on the insurance company. In particular, they must prove that you committed misrepresentation (possibly intentionally, depending on the state) and that the misrepresentation was material.
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