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April 22, 2008

California Health Insurers Must Reinstate Policies

Chalk one up for sickly patients. California regulators have ordered insurers there to reinstate the health insurance policies of 26 people who lost their coverage after the insurers claimed they had lied on their applications, according to news reports. The 26 cases represent the most egregious examples of insurers wrongly "rescinding" policies, typically for inadvertent errors. The person gets sick and starts making expensive claims, and the insurer cries "fraud!" The patient says "forgot!" or sometimes "say what?" For example, one woman I spoke with on this topic had answered "no" when asked if she'd been treated for cancer in the past 10 years. Later her policy was yanked because the insurer claimed that regular blood work she had to ensure her earlier cancer hadn't returned constituted cancer treatment.

Now California begins a case-by-case review of thousands of rescissions in the past four years, and it may be that these 26 are the tip of a fairly hefty iceberg. And consumer advocates say there's no reason to believe this issue is confined to California. They expect similar cases to begin emerging elsewhere.

These problems arise in the individual health insurance market, where people buy policies on their own. That market is much more loosely regulated than the group market—and often more problematic for patients—as I discussed a few months ago.

Right now, only about 5 percent of people buy insurance this way. But if Sen. John McCain has his way, many more would very likely start buying insurance on their own. The presumptive Republican nominee has proposed eliminating the tax break that employees currently get on their health insurance benefits and instead giving people a tax credit of $2,500 for individuals and $5,000 for families to put toward buying coverage. I also wrote today about the presidential candidates' healthcare reform proposals.

Many policy analysts see merits to the restructuring that McCain proposes, but they argue that without better regulation of the individual market, people who are older or sick won't be able to get affordable health coverage, or any coverage at all. They point to what's going on in California as an example of the kind of problems that can occur. "Look at the rescission mess in California," said health policy analyst Robert Laszewski, when I interviewed him for the election health reform piece. "The Democratic nominee will stand up and say, 'John McCain will throw you to the market wolves.' " McCain is expected to elaborate on his healthcare reform proposal at the end of April. Maybe at that time he'll offer details about how he plans to protect consumers from predatory insurance practices.

As for this rescission mess, I'd like to hear from people who've experienced problems similar to what's occurring in California. Is this just a left coast phenomenon, or is it happening elsewhere, too?

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Posted by healthinsurance at April 22, 2008 02:38 PM