Thursday, April 29, 2010

I'm Not Bad, I'm Just Drawn That Way

The health insurance industry has been vilified in the media and by self serving politicians over a practice of cancelling contracts when fraud is discovered. To read some of the stories you would think policy rescission was rampant any time someone files a claim.

Most of the reports are greatly exaggerated with omission of facts that are relevant to the issue. InsureBlog has examined several of these over the years including this oldie but goody from 2008 involving HealthNet and Patricia Bates.

The case got a lot of press and HealthNet was branded unjustly (in our opinion) since more was made of the rescission and almost nothing was said about the fact that Ms. Bates lied on her application about her weight or her heart condition.

Part of Obamacare is a provision that prohibits carriers from rescinding coverage. Many will view that as a good thing but like everything else in Obamacare, it comes with a price.

Politico is reporting that carriers will cease the practice of rescinding policies starting next month.

The decision to end rescission, as the practice is known, was made during a Tuesday afternoon conference call of chief executives organized by their trade group, America’s Health Insurance Plans, and represents the industry’s latest attempt to build political good will after the bruising health care fight.

The decision came on the same day that WellPoint, under fire for reports that it had targeted breast cancer patients for rescission, announced it would end the practice by Saturday. On Wednesday, UnitedHealth also announced it had eliminated the practice,

Big cheer goes up.

But wait, there's more . . .

Congressional Democrats and Health and Human Services Secretary Kathleen Sebelius had pressured companies to end the practice early. The overhaul plan will ban the practice in September, except in cases of fraud or intentional misrepresentation, and subject it to a third party review.
(emphasis added).

So really nothing has changed.

If you lie on your application, like Patricia Bates, you can still lose your coverage. The only real change is a "third party review".

Even then, there is little change from the current policy. Cases of suspected fraud are routinely reviewed by outside medical experts before a decision is made to approve or deny a questionable claim.

Same thing for possible rescissions.

Legal counsel is consulted to make sure the carrier is on sound footing before tendering a rescission letter.

So in spite of all the hype, the rescission issue is more of a sound bite than something that will really . . . change . . .

"Health reform made rescissions illegal"

No, it didn't.

Unjust rescissions were a violation of contract law before. Nothing changes now.

Like the line delivered by Jessica Rabbit, the health insurance industry isn't bad, they are just drawn that way.
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