The least glamorous part of this business (what, you thought insurance was all glitz?) is completing the application. Back in the day, I always thought that the considerate thing for me to do was to ask the questions, and record the answers. That way, I reasoned, I wouldn’t wear out my clients’ hand, or my welcome.
Times change, though, and I long ago dropped that practice. There are a lot of sound reasons for having the insured complete “the app,” not least among them is the potential liability I risk in how I ask the questions and, more importantly, how I record the answers. So, I hand the app to the client, and wait patiently for him to complete it.
I do offer one admonition, however: don’t lie, and don’t volunteer. That is, if the application asks if you’ve had a bloody nose in the past 5 years, and you had one 4 years and 11 months ago, then the answer is yes. But if it truly was 5 years and 1 month ago, then one is not obligated to mention that.
The goal, however, is to be truthful, because lies (whether by commission or omission) will come back to bite you.
Which brings us to the point of this post (and yes, there really is one):
Now, WellPoint is really Blue Cross, but this issue is really about the industry, and about the application and claims processes:
“Attorney William Shernoff said in a statement that he filed the cases to trigger reforms of what he described as a widespread practice in the health insurance industry.” [ibid]
The phenomenon of underwriting at claims time is, at best, problematic. Blue Cross isn’t the only company to engage in this practice, of course, but because it is such a marketplace behemoth, it’s bound to attract more attention.
Obviously, some people lie on their applications. The challenge is that there’s no evidence that most people do. The challenge, of course, is how a carrier can protect itself while at the same time treating its policyholders fairly. And that’s not as easy as it sounds:
"At the time she completed the (application) she was 46 years of age and had never experienced any illness for Hepatitis B," the lawsuit said. "Plaintiff did not realize her childhood exposure to Hepatitis B was relevant to the questions posed in the (questionnaire)."
It doesn’t really matter, legally, whether or not Hep B has anything to do with breast cancer (as far as I know, it doesn’t). If the application asked if this patient/insured has ever had hepatitis, then that is a material misrepresentation. On the other hand, if it asked about recent symptoms, or limited the relevant question to, for example, the previous 5 years, then it is not.
The answers one gives on an insurance application form the basis of the relationship. These answers, based on the phrase “to the best of your knowledge,” are representations, not guarantees. That’s an important distinction, because it means that we have a responsibility to be truthful, but what we don’t know may hurt us.
The carrier relies on these representations in offering and pricing the product. Carriers shouldn’t routinely deny (or even just slow) claims without some reasonable basis for doing so. But they need to have some way of dealing with questionable claims, as well.
We’ll watch this one closely.
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