By Julie Appleby
USA TODAY
May 14, 2007
Blue Cross of California — under scrutiny for retroactively canceling health insurance policies leaving patients with unpaid medical bills — has agreed to a class-action settlement that would sharply alter its practice and could set a precedent for other insurers.
At issue is an infrequently used but longstanding industry practice: canceling coverage after patients make costly claims, if insurers find mistakes or omissions on application forms completed by policyholders. The practice, called “rescission,” affects people who buy their own insurance, not those covered under group plans, such as job-based coverage.
In the proposed settlement, presented in Los Angeles County Superior Court on Friday, Blue Cross agreed not to retroactively cancel coverage unless policyholders “intentionally misrepresented” information on their applications.
That differs from the stance that Blue Cross and other insurers have taken. They have argued that laws allow them to cancel policies even if applicants had made honest mistakes or unknowingly left out information from their applications.
http://www.usatoday.com/printedition/money/20070514/cancel.art.htm
Comment:
By Don McCanne, MD
The purpose of rescission is to prevent individuals from obtaining a free ride by not purchasing insurance while they are healthy, but then purchasing it when a major problem develops. For insurance to work, the healthy have to pay into the risk pool to cover the costs of the sick.
Will this settlement cause more individuals to purchase insurance while they are still healthy? Of course not. It actually reduces the risk of rescission. Further, Blue Cross has agreed to redesign its application to minimize mistakes (i.e., make it easier to prove intentional misrepresentation on the part of those who deliberately falsify the application). The net result will be that more applicants will be rejected for coverage.
Isn’t this pointing us in the wrong direction? This is a policy that specifically prevents those with greater health care needs from obtaining coverage in the individual private insurance market.
Wouldn’t it be smarter to adopt policies that would automatically insure everyone forever? Can anyone think of a more efficient, more equitable and more effective way than national health insurance? What are we waiting for?