Vanishing Coverage

USA Today offers the following for consideration.

Even after being approved, policyholders can see their coverage amended to exclude certain medical conditions or revoked entirely, sometimes long after the policies are issued.

This follows the "if it bleeds it leads" philosophy of news reporting.

Case in point.

Denise Wheeler, an artist in Laguna Beach, Calif., thought she and her family had health insurance.

So did Tony Seals, a self-employed businessman in nearby Riverside. Across the country in Connecticut, Maria Locker and Linda Gaskill each bought short-term insurance policies to protect themselves against catastrophic costs.

But each was left with tens of thousands in unpaid medical bills when their insurers — all major companies — retroactively canceled their policies after they faced expensive health problems. "It's the most devastating thing that's ever happened to us," says Seals, 43.

No doubt these are tragic situations. No one likes surprises.

That includes the carrier . . .

Insurers say they rarely revoke policies, and generally do so only because of misleading or omitted information on applications.

Fraud happens. When a material misrepresentation appears on a health insurance application the carrier is entitled to remedy the situation.

Failing to note a recent minor sore throat or having your tonsils removed 30 years ago is not a material fact for underwriting.

Failing to disclose recent, undiagnosed symptoms or prior treatment for a chronic or serious medical malady is a different story entirely.

I wonder what the full details are in the cases cited above.

In May 2006, Wheeler was rushed to the hospital with a perforated ulcer. Wheeler says she was unaware of the ulcer until she collapsed after her youngest son's baseball game. "You get this hole in your stomach that erupts," she says. "Your body fills up with toxins, and it kills you."

Not long after the five-hour surgery, Wheeler got a letter from her insurer asking for more information about her health history. On her application, she had not told the insurer that she went to an emergency room and her OB/GYN three months before applying for her insurance policy in October 2005, court documents say.

Every application I have seen asks about medical treatment, tests, meds & doc visits in the 6 months prior to the application. A "routine" visit to a doc for a well check up might be overlooked as incidental, particularly if there were no symptoms that prompted the visit and all testing was negative.

But an ER visit is difficult to forget and indicates something more is amiss.

That would appear to be a material misrepresentation of fact.

Like the Wheelers, the Seals family bought coverage on the individual market after Tony Seals became self-employed. They applied online for an individual policy with Health Net on March 15, 2003. At the time, they had four children.

Seals answered all the questions, including one asking when his wife, Susan, had her last menstrual period.

Asking for details about a menstrual cycle is not uncommon.

The policy was approved and became effective April 1, 2003, according to court documents.

About mid-April, Seals says, they found out his wife was pregnant.

Good timing . . . or is it?

In April 2004, when Madeline was 6 months old, the insurer told them it had reviewed their application and "felt like we had not given them a correct date for my wife's last menstrual period, so would rescind the coverage," Seals says.

The insurer had looked at Seals' wife's OB/GYN records and found that she had told the doctor a date for her last period about two weeks' different than the one Seals had included on the application, Seals says.

This would appear to be a material misrepresentation of fact. I have to ask this on a regular basis when taking applications for females who are still capable of bearing children. Not once have I had a woman tell me it was around the 15th. They know precisely.

Why would someone tell an insurer one thing and their doc something different? Missing by a day or so could be a memory lapse. Missing by 2 weeks raises eyebrows.

In Connecticut, concern has centered on short-term health insurance policies, although Blumenthal says his office has also seen problems with longer-term policies.

Gaskill, a 63-year-old retiree, says she began buying policies from Assurant Health in 2005. After a six-month policy expired, she signed up for a new one with Assurant.

Her new policy went into effect on Jan. 24, 2006,

STM medical plans have a place, but they also have severe limitations. Most notably is a 5 year look back on pre-ex conditions.

In March, she went to the doctor for a small lump under her ear. It had been there awhile, but it did not hurt or bother her so she did not make an appointment until it seemed a bit larger than before.

The doctor asked how long she had the lump.

"I said 'maybe a year,' "

This was a condition that existed prior to the policy. The carrier is well within their rights to deny any claim.

The lump turned out to be cancer. After checking her medical records, Assurant revoked her policy, leaving her with $30,000 in surgical bills.

All of the cases cited are still under review. Applicants who seek to defraud a carrier should well be aware of the consequences.