What A Difference A Law Makes

Posted on by Karina

Last June, the Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on the termination of individual health policies by insurance companies, including the controversial practice of rescinding coverage after policyholders become ill. At the hearing, Chairman Waxman explained why the practice of rescission is so shameful:

When people with individual policies fall ill and submit claims for expensive treatments, some insurance companies launch investigations. They scour the policyholder's original insurance application and the person's medical records to find any discrepancy, any omission, or any misstatement that could allow them to cancel the policy.

They try to find something – anything – so they can say that this individual was not truthful. It doesn't have to relate at all to the medical care the person is seeking, and often it doesn't. You might need chemotherapy for lymphoma, but the insurance company can cancel your coverage because you failed to disclose your gall stones.

It may come as a surprise to most people, but the insurance companies believe they are entitled to cancel policies even when these omissions or discrepancies are unintentional. They believe they have the right to cancel policies even when someone else, like the agent who sold their policy, was responsible for the discrepancy in the first place. In addition, they can terminate coverage not just for the primary policyholder, but for the entire family, including innocent children who did nothing wrong.

The Committee found, among other alarming issues, that in the last five years 20,000 individual insurance policyholders have had their policies rescinded by just three insurance companies (Assurant, UnitedHealth Group, and WellPoint). The investigation also uncovered that at least one insurance company, WellPoint, evaluated employee performance based in part on the amount of money its employees saved the company through retroactive rescissions of health insurance policies.

After hearing from multiple witnesses who testified on how their policies had been rescinded in the midst of fighting for their lives, Subcommittee on Oversight and Investigations Chairman Stupak asked each of the health insurance CEOs present if they would stop targeting their policy holders–each CEO replied they would not:

Rep. Stupak: Let me ask each of our CEOs this question, starting with you, Mr. Hamm. Would you commit today that your company will never rescind another policy unless there was intentional fraudulent misrepresentation in the application?

Mr. Hamm, CEO, Assurant Health: I would not commit to that.

Rep. Stupak: How about you, Mr. Collins? Would you commit not to rescind any policy unless there is intentional fraudulent misrepresentation?

Mr. Collins, CEO, Golden Rule Insurance Company, UnitedHealth Group: No, sir. We follow the State laws and regulations and we would not stipulate to that. That is not consistent with each State’s laws.

Rep. Stupak: How about you, Mr. Sassi? Would you commit that your company will never rescind another policy unless it was intentional fraudulent misrepresentation?

Mr. Sassi, President and CEO, Consumer Business, WellPoint, Inc: No, I can’t commit to that. The intentional standard is not the law of the land in the majority of States.

As Members of Congress worked on comprehensive health insurance reform, people like Robin Beaton were at the forefront of their minds. Robin testified that days before she was scheduled to have a double mastectomy for a very aggressive form of breast cancer, Blue Cross canceled her surgery, launched an investigation into whether she had not disclosed acne, and rescinded her coverage to get out of paying for her care. In the five months it took to get her insurance back, Robin’s tumor grew from 2.3cm to 7cm and she had to have all her Lymph nodes removed.

Health insurance reform signed into law last month puts Robin and all Americans–not the insurance companies–in control of their own health care. Of the many consumer protection benefits and insurance reforms that go into effect this year, is a ban on all health plans from dropping people’s coverage when they get sick:

A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Such plan or coverage may not be cancelled except with prior notice to the enrollee, and only as permitted under section 2702(c) or 2742(b).

While news reports last week surfaced that the insurance giant WellPoint has been singling out breast cancer patients for “investigation, with the intent to cancel their policies” and even using a computer algorithm to systematically target them, Speaker Pelosi, House Democrats and the Administration have been calling on health insurance companies to immediately stop this disgraceful practice and implement the federal ban on rescissions ahead of the provision taking effect this fall. Yesterday, Committee and Subcommittee Chairs from the House Committees on Ways and Means, Energy and Commerce, and Education and Labor sent a letter to the CEOs of seven insurance companies urging them to end rescissions and institute independent third-party review:

Last week, most of your companies announced plans to implement ahead of schedule the provision in the health reform law allowing individuals up to age 26 to obtain coverage through their parents’ health insurance. This step will help many bridge the gap between graduation and the effective date of this requirement. This decision signals that you are willing to work to make health insurance more accessible and affordable. We commend you for this step.

Also last week, Secretary Sebelius, reacting to recent media reports, wrote to Ms. Braly asking that WellPoint immediately end its efforts to rescind health insurance coverage except in cases of fraud or intentional misrepresentation of material fact. These rescissions hurt patients who need coverage the most, such as women diagnosed with breast cancer. We are writing to ask all of your companies to end any such abusive practices immediately.

In addition, to ensure that rescissions occur only in cases of fraud or intentional misrepresentation of material fact, we request that each of your companies immediately institute a policy of independent, external third party review. Under such a procedure, no individual health insurance policy should be rescinded until the review confirms that fraud or material misrepresentation has in fact occurred.

Taking these actions now would be consistent with your earlier decision to implement consumer protections for individuals under 26 voluntarily and would further demonstrate a commitment to reliable coverage for your policyholders.

As of this morning, two of the companies who told Congress last year they wouldn’t end rescissions, WellPoint and UnitedHealth Group, have announced that they will implement the rescission reforms in the health insurance reform bill ahead of schedule–with WellPoint ending them on May 1st, and UnitedHealth ending them immediately. Speaker Pelosi on the news of UnitedHealth's announcement that it would implement rescission reforms ahead of schedule:

Today, UnitedHealth became the second major health insurer to take action even sooner than the law requires to end the shameful practice of dropping people's health coverage when they get sick.

This decision marks another step forward in our effort to implement health insurance reform effectively and quickly, and ensure that the health care system works to the benefit of all Americans. All insurers should end this practice immediately.

This announcement is further evidence that congressional Republicans who are calling for repeal are out of touch because they are against ending abuses by insurance companies that even the companies themselves are beginning to address.

With the health insurance reform now law, no longer will corporate interests stand in the way of the best interests of patients and the best care our doctors can provide.

While Congressional Republicans continue to call for the repeal of health insurance reform that ends practices like rescissions, Democrats will remain vigilant in our oversight of the health insurance industry and hold insurance companies accountable to keep premiums down and prevent denials of care and coverage.

Learn more about the health insurance industry's practice of rescissions from the Gavel's coverage of the oversight hearing last year»

Learn more about the insurance reforms and other provisions in the health insurance law»

UPDATE: America’s Health Insurance Plans (AHIP), the national association representing health insurance companies, responded tonight to Chairmen Levin, Miller, and Waxman’s letter saying that they will implement the ban on rescissions next month:

We are writing in regard to the rescission provision in the new health care reform law that is scheduled to go into effect in September. While many health plans already abide by the standards outlined in the new law, our community is committed to implementing the new standard in May 2010 to ensure that individuals and families will have greater peace of mind when purchasing coverage on their own.

AHIP also states “support” for independent, external third party review:

Our industry also has long supported states setting up a process to make external review available to individuals whose policies have been rescinded so they can have their case heard by an independent panel of experts whose decision would be binding on the health plan. In fact, a number of health insurance plans already provide this valuable service to their individual market policyholders. Other plans are in the process of reaching out to state officials and third party review organizations to explore ways to make independent review available to consumers.

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