Health insurance is supposed to provide you with the assurance that if you have a medical emergency, you won’t be crushed by debt as well. But what if your insurance company drops your policy just when you really need it?
Jennifer Wittney Horton of Los Angeles told a House Energy and Commerce Subcommittee this week that she believed she was protected. Then, when she needed costly treatment, her coverage was abruptly terminated because in her medical history she had failed to mention her irregular periods and a weight-loss medicine that she was no longer taking. (Ms. Horton is a plaintiff in a class-action lawsuit against Blue Cross of California, her former insurer.)
The insurance industry refers to the practice of ending coverage for patients who are in need of expensive care as “rescission.” The industry claims rescission is rare and that its sole purpose is to prevent fraud by denying coverage to people who misrepresent their medical history.
However, even the insurance companies are not fully willing to commit to this version of the story. Executives of three leading health insurance providers were asked at this week’s subcommittee hearing whether they would be willing to limit rescission to only cases of intentional fraud. As reported in the Los Angeles Times, the executives declined.
An insurance company that is dealing fairly with its customers might deny coverage for a pre-existing condition revealed in a customer’s medical records. There is no justification, however, for using trivial or irrelevant omissions to terminate coverage when a premium-paying customer develops an unrelated and expensive health problem. Health insurers that want to manage their risks could review prospective customers’ medical records themselves before they approve new policies, as life insurers do already.
But health insurers profit by conducting after-the-fact underwriting. The House Energy and Commerce Subcommittee on Oversight and Investigations found that the health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. saved more than $300 million over a five-year period by canceling the policies of more than 20,000 people.
While the insurance companies try to keep their savings out of the public eye, their employees are reminded that the companies benefit by refusing to pony up when their customers get sick. The House subcommittee examined the performance reviews of employees at WellPoint’s Blue Cross and found that one employee was lauded for “exceptional performance” in a report that discussed the worker’s role in terminating thousands of policies. A November 2007 article in The L.A. Times revealed that the insurer Health Net Inc. used employees’ involvement in rescission as one of the criteria for determining bonuses.
Now that credit card issuers have been reined in for engaging in sharp and unfair business practices, Congress is right to turn its attention to health insurers. The underlying problems are similar. In both cases, businesses sought to make easy money by developing misleading and confusing products and taking advantage of consumers who were ill-equipped to fight back. The stakes are higher and the outrage is greater in the health insurance area, where the victimized consumers face far worse physical and financial damage.
While lawmakers on both sides of the aisle consider legislation, and while lawsuits against health insurers make their way through the courts, consumers need to defend themselves as best they can. Maybe there is a business opportunity here. Someone can sell insurance insurance, to protect people from being victimized by their health insurance providers.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
Health insurance is supposed to provide you with the assurance that if you have a medical emergency, you won’t be crushed by debt as well. But what if your insurance company drops your policy just when you really need it?
Jennifer Wittney Horton of Los Angeles told a House Energy and Commerce Subcommittee this week that she believed she was protected. Then, when she needed costly treatment, her coverage was abruptly terminated because in her medical history she had failed to mention her irregular periods and a weight-loss medicine that she was no longer taking. (Ms. Horton is a plaintiff in a class-action lawsuit against Blue Cross of California, her former insurer.)
The insurance industry refers to the practice of ending coverage for patients who are in need of expensive care as “rescission.” The industry claims rescission is rare and that its sole purpose is to prevent fraud by denying coverage to people who misrepresent their medical history.
However, even the insurance companies are not fully willing to commit to this version of the story. Executives of three leading health insurance providers were asked at this week’s subcommittee hearing whether they would be willing to limit rescission to only cases of intentional fraud. As reported in the Los Angeles Times, the executives declined.
An insurance company that is dealing fairly with its customers might deny coverage for a pre-existing condition revealed in a customer’s medical records. There is no justification, however, for using trivial or irrelevant omissions to terminate coverage when a premium-paying customer develops an unrelated and expensive health problem. Health insurers that want to manage their risks could review prospective customers’ medical records themselves before they approve new policies, as life insurers do already.
But health insurers profit by conducting after-the-fact underwriting. The House Energy and Commerce Subcommittee on Oversight and Investigations found that the health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. saved more than $300 million over a five-year period by canceling the policies of more than 20,000 people.
While the insurance companies try to keep their savings out of the public eye, their employees are reminded that the companies benefit by refusing to pony up when their customers get sick. The House subcommittee examined the performance reviews of employees at WellPoint’s Blue Cross and found that one employee was lauded for “exceptional performance” in a report that discussed the worker’s role in terminating thousands of policies. A November 2007 article in The L.A. Times revealed that the insurer Health Net Inc. used employees’ involvement in rescission as one of the criteria for determining bonuses.
Now that credit card issuers have been reined in for engaging in sharp and unfair business practices, Congress is right to turn its attention to health insurers. The underlying problems are similar. In both cases, businesses sought to make easy money by developing misleading and confusing products and taking advantage of consumers who were ill-equipped to fight back. The stakes are higher and the outrage is greater in the health insurance area, where the victimized consumers face far worse physical and financial damage.
While lawmakers on both sides of the aisle consider legislation, and while lawsuits against health insurers make their way through the courts, consumers need to defend themselves as best they can. Maybe there is a business opportunity here. Someone can sell insurance insurance, to protect people from being victimized by their health insurance providers.
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