Posted by healthinsurance on March 23rd, 2008
Imagine spending thousands of dollars a year for health insurance, only to have it canceled after filing claims for treatment of a serious illness. Some retroactive policy "rescissions" appear unfair and arbitrary, raising doubts about the value of insurance and embarrassing the industry.
Insurance companies say they need the right to void policies because some applicants lie about their health. But stung by widespread outrage over some recent cancellations, the industry is proposing a way to resolve rescission disputes between policyholders and companies.
America's Health Insurance Plans, an industry group in Washington, is advocating an appeals process involving independent review by a panel of outside experts. Decisions would be binding on health insurers. Earlier this month, the group presented the plan to representatives of state regulators, insurance commissioners and consumer advocacy groups.
"It's a positive step in the right direction and provides an opportunity for prompt dispute resolution while minimizing the need for litigation," says Ron Pollack, executive director of Families USA, a Washington nonprofit consumer organization.
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This issue affects people who purchase their own policies -- not those who are covered under an employer-sponsored plan. Health insurers in most states can deny coverage based on an applicant's health history. Disclosure of some pre-existing conditions, such as cancer or heart disease, may result in a policy denial. But failure to do so could trigger a retroactive policy cancellation in the midst of treatment.
One challenge for health insurance applicants is that sometimes the medical-history forms they must complete are confusing and difficult to understand. Minor health issues that may not seem worth mentioning, and that were never treated by a physician, may later turn out to have been early warning signs of disease. Brokers or agents eager to complete a sale may urge a naive applicant to fudge an answer.
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