Losing Your Insurance for Getting Sick

Word of the day: rescission. That’s what they call it when you apply for health insurance, they accept you, you pay your premiums month after month and year after year, and then you get really sick. And they yank your coverage, because it’s expensive for them all of a sudden.

In 2006, Blue Cross was faced with lawsuits from 10 former Blue Cross members and five nonprofit hospitals for this sort of activity. The former members said their coverage was rescinded when they needed it most:

In each case, the suits allege, Blue Cross didn’t look into the member’s medical history until an expensive claim came in. Then, the plaintiffs contend, Blue Cross extensively scrutinized their records looking for something that had not been disclosed and seized on whatever discrepancies they found to justify revocation of the policy, even if the inconsistencies were inadvertent or irrelevant to the claim.

Yenny Shu of Los Angeles, for instance, says her coverage was canceled after she was diagnosed with breast cancer at 46. In its letter rescinding her coverage, Blue Cross allegedly told her that she failed to disclose her exposure to the hepatitis B virus when she was a child.

Other patients say they had, in fact, disclosed the information Blue Cross accused them of omitting.

And the hospitals sued saying Blue Cross refused to pay for treatment it had already authorized.

Echoing the patients’ allegations, the hospitals contend that Blue Cross doesn’t bother to investigate the information on an application until after it receives a bill. The hospitals allege the investigations — an illegal practice known as “post-claims underwriting” — are triggered by bills that reach a threshold cost.

Whether or not the rescissions are proper, the hospitals contend, state law requires health plans to pay them for treatment they authorize in advance.

Well, rescission is back in the news. That’s because insurance executives went before Congress this week and:

Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show “intentional fraud.”

The answer from all three executives:


No. No coverage for the Texas nurse whose coverage was taken away when she had breast cancer, with the excuse that she hadn’t told them she had gone to a dermatologist for acne. No to more than 20,000 people who were dropped from coverage because they came down with one of more than 1,000 different conditions. No because those 20,000 people’s lives were apparently not worth the $300 million in claims saved over five years.

But insurance company employees have gotten glowing performance reviews for dropping those people from coverage. And the insurance company executives who testified before Congress? They “were courteous and matter-of-fact in their testimony,” but to the people they’re rescinding coverage from, even the ones who filled out their medical histories in good faith? Apparently all they have to say is “no.”

It’s inhuman. And now, as we enter a battle for health care reform, they’re showing what they’re made of. Which may be a good thing—as one consumer advocate said,

“When insurance companies go under oath and admit they are canceling innocent patients when they get sick, it makes it very difficult for lawmakers to pass a law that requires every American to buy a policy or face a tax fine. It opens the way for a public option to hold the companies in check.”