RESCISSION

Original Link: http://www.washingtonmonthly.com/archives/individual/2009_06/018667.php

By Steve Benen

In light of the current policy debate, it was awfully nice of insurance industry executives to help demonstrate why a public option is so necessary as part of the broader reform effort. (via Kevin Drum)

Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive. [...]

An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.

It also found that policyholders with breast cancer, lymphoma and more than 1,000 other conditions were targeted for rescission and that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses.

The insurance industry -- you know, the one conservative lawmakers and the AMA are so desperate to protect at all costs -- has this unpleasant habit called "rescission." Customers have insurance, and they pay their premiums, but once they get sick and require expensive medical treatment, the companies drop the coverage.

And in testifying before Congress, executives of these insurers not only confirmed the rescission practice, but said they had no plans to change the money-saving tactic.

One executive said rescission is about "stopping fraud and material misrepresentations that contribute to spiraling healthcare costs." So, for example, when a woman in Texas was diagnosed with aggressive breast cancer, her insurer dropped her coverage because the company found an instance in which she visited a dermatologist for acne, and didn't tell the insurance company about it. This, the insurer said, was an example of "fraud and material misrepresentation."

Late in the hearing, [Rep. Bart Stupak (D-Mich.)], 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."

Rep. John Dingell (D-Mich.) added, "This is precisely why we need a public option."