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Posted Tuesday, September 01, 2009 12:44 AM

The Fight Over Rescissions

Newsweek
By Jeremy Herb

At an Energy and Commerce Committee hearing this summer, members heard the story of Robin Beaton, a 59-year-old whose insurance was revoked after she got breast cancer. The reason? She didn't disclose she once was treated for acne. Beaton isn't unique. Her story resonates with the thousands of Americans who each year fall victim to rescission, the practice of revoking insurance. Even Republican subcommittee chair Joe Barton, who voted against the final commerce-committee health-care bill, denounced rescissions, declaring he spoke for the committee "on both sides of the aisle." But when oversight subcommittee chair Rep. Bart Stupak asked the three insurance executives at a June hearing if they would stop the practice, all responded with a no.

Rescissions are unique to the individual insurance market, occurring when companies issue a policy, then revoke it after a claim is filed. The practice, also called postclaims underwriting, is designed to help insurers guard against fraud, stopping people from purchasing insurance after they get sick. But its use with people like Beaton, whose acne treatment had nothing to do with her breast cancer, drew the ire of the congressmen on the subcommittee. "It's a bigger issue than people think," Stupak says. "I think it took everybody by surprise, the extent that it goes on." The commerce-committee investigation released the first public data on the practice, finding that the three companies, WellPoint, UnitedHealth, and Assurant, rescinded nearly 20,000 policies from 2003 to 2007, saving $300 million. The committee found that at WellPoint, employees were rewarded for rescinding policies based on how much money they saved the company. (A WellPoint spokesman says the company has reformed its rescission practices.) "The nature of competition is kind of a race to the bottom," says Georgetown professor Karen Pollitz, who has studied postclaims underwriting and has testified before the committee. "It just doesn't pay to cover somebody when they have cancer if your competition won't."

A federal law passed in 1996 bans rescission except in cases of fraud. But the law goes unenforced because there's no regulation at the federal level and nearly all states have much weaker laws on rescission, says Pollitz. The commerce-committee investigation found that just four states tracked rescissions. More than one third of state commissioners couldn't supply the committee with a complete list of insurers that offered individual health policies in their state. H.R. 3200, the current house version of the health-care bill, clarifies the ban and creates a new office and commissioner for federal enforcement. Stupak says he also plans to introduce amendments limiting rescissions to 30 days after a policy is issued.

Representatives of the health-insurance industry say there's broad consensus in the industry about ending rescissions, but that appears contingent on the passage of  broader reforms that would ensure universal coverage. With everybody covered, the practice becomes virtually obsolete. Robert Zirkelbach, a spokesman for America's Health Insurance Plans (AHIP) says rescissions are already rare, occurring in less than 1 percent of policies. If all Americans had insurance, the incentives to drop people from insurance rolls would change, especially as increasing numbers of healthy, currently uninsured people buy into the system. "In the situation of health reform, you get more of this horse-trading aspect," says Hilary Haycock, who helped author a study on the practice for the Robert Wood Johnson Foundation, "where insurers would see it in their interest to trade guaranteed issue of coverage for promising not to drop people."

While AHIP sent a letter after the June hearing clarifying the executives' statements and reiterating the industry's support to stop rescissions, Stupak and the commerce committee will keep hammering away on the issue. A spokeswoman for Stupak said the industry statements at the hearing "made it clear that they have no intention of changing their policies." As Congress returns this month, Stupak plans to launch a second investigation into rescissions, increasing the inquiry to 10 companies from three and seeking more information about how companies choose to investigate claims. Stupak and committee chairman Rep. Henry Waxman also recently demanded salary and revenue information from 52 insurance companies, drawing sharp criticism from AHIP. On Monday, Waxman asked six insurers, including WellPoint and Aetna, to provide information about the practice of "purging" small businesses by raising their premiums to unaffordable levels after employees fall sick and, thus, claims increase.

In an increasingly explosive debate over health care, stories like Beaton's─and the possibility for more like hers to arise in further hearings─are easy ammunition for reform advocates. Michael Chernew, a health-care policy professor at Harvard, says that a topic like rescissions can vilify insurance companies to such an extent that the public perception of the industry is unrealistically negative. But with reform opponents threatening that the plug will be pulled on Grandma, how long will it be before we see ads about insurance companies pulling the plug on your insurance because you have acne? When it comes to health-care politics, playing dirty is nothing new. 
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Posted By: Alchemist65535 (September 4, 2009 at 4:30 PM)

Some idiot ran a red light and broadsided me when I was 24 years old.  I had three fractured vertabras and assorted damages.  Because of health problems, headaches caused at least partly by that same accident and the damage done to my neck, none of them expensive in the way of cancer, I was never able to work for a major company and always had to be self employed.  I haven't been insured for most of my life and yet my claims ratio for a lifetime has been under 20%.  I have been denied for 38 years because of the back injuries which some day might require surgery or something.  Our system STINKS.  For decades I was perfectly willing to buy health coverage but only if it covered all of me, not paying 100% extra and leaving out anything spinal ever.  I wrote software for the insurance industry and consulted yet I couldn't buy the product.  They would have made money on me but I couldn't buy the product.  There is such an inherent lack of fairness in our system that I have had to face financial ruin for the past 38 years in case anything did happen.  Any plan thjat doesn't cover everybody is maintaining the same basic lack of fairness we have had for decades..


Posted By: dpmoss75 (September 4, 2009 at 3:21 PM)

kginca, our system is superior to everyone elses in the world.  We have more technology, more care for chornic disease than any other country in the world, why do you think everyone with money comes here for their care?  UK, Cuba, canada are great if you are not sick, or have some short time illness like a cold, UTI, ear infection etc...  Get cancer, you are screwed there, worse than here.  No acess to the new drugs etc.. wich vastly improve outcomes.  

You go on to cite infant mortality rates, child mortality rates are almost equal, but infant mortality rates are worse for the US than many more nations.  You know why.  They define it differently.  In the US, any birth where the infant takes a breath is considered a live birth.  In other countries, they have sitpulations that the infant has to live for 48 hrs, has to have a certian weight, has to be born after 26 weeks,  all of which take out of the equation the deaths that drag that number down in the US.  If every other country counted births the way we do, we would not be #29, and would be in the top 5.  

You all think that the government will come in and make everything better.  STOP DRINKING THE KOOL AID.  You are fools.  The government allready controlls heath care, and it is the government why heatlh care is so screwed up in this country.  Everyone wants everything paid for, chiropracy, IVF, eye surgery, etc.. so the government goes and mandates to insurance that in additon to all the primary care that they have to pay, and all the diabetes, hypertension, cancer they have to cover all this stuff too.  You think it is all free.  When you pay your insurance you are essentially paying for all YOUR preventitive care and your risk of getting something bad, in additon to the costs of all this other stuff, like IVF if you were a man that you will never use.  That is why insurance is so expensive.  You saviors in government also decide to cut costs so much, that it prevents hospitals from breaking even.  The only solution will be rationing care, and instead of 85% of poeple being able to get insurace from the priavte sectory, it will drop to 25%, and everyone else will get great old government care (think county hospitals, VA etc..)


Posted By: kginca (September 4, 2009 at 2:04 AM)

GreyMatter (and others who still believe our system is superior to Canada's and Western European programs), We have "good" insurance coverage that we pay through the teeth for thanks to COBRA, however we still have to wait between 6 and 10 months to see specialists! Our system is BROKEN folks! We pay much more for care, yet our infant and child mortality rates are among the worst of developed nations. It may be true that the wait is long in Canada, but it's long here too and getting longer. Without real reform it isn't going to get better, it will only continue to get more expensive, and more broken.