Tuesday, August 4, 2009

Your health insurance can be cancelled if you get sick.

If you're one of the 17 million Americans covered by private insurance.  The cancellation is retroactive, meaning you're required to pay for all the medical procedures you have already received; but they do return the premiums you have already paid. This is called recission. You can see how this might be a problem if you're in the midst of treatment for something serious.

What is your actual chance of recission? This brilliant article by a statistician named Taunter shows that people with private insurance have about a 50% chance of being rescinded when they actually come down with something serious. Pretty troubling. Why so high? Because a person's chance of getting serious illness is about 1% a year, of those 1%, about half of their policies are cancelled--.5%.

In one of the healthcare hearings before Congress, the CEO of one of larger insurance companies said:
Rescission is rare. It affects less than one-half of one percent of people we cover. Yet, it is one of many protections supporting the afford ability and viability of individual health insurance in the United States under our current system.
Richard Collins of UnitedHealthgroup said:
Less than one half of one percent of all of our individual insurance contracts in 2008 were terminated or rescinded.
What triggers recission?  Here's the statement of a woman whose insurance was rescinded when she did not include a condition that a doctor had written on her chart; the doctor never told her about the condition and she was never treated for it. Here's another example of a man's coverage being retroactively cancelled during cancer treatment for a condition that he knew nothing about.

How important is recission to insurance companies? According to the LA Times:
One of [California's] largest health insurers set goals and paid bonuses based in part on how many individual policyholders were dropped and how much money was saved.
Blue Cross Blue Shield ties employment evaluations to quantity of recissions.

During the House health care hearings in June , 2009, each of the four CEO's answered "No" to following question "Would you commit not to rescind any policy unless there is intentional fraudulent misrepresentation?" No. No. No. Reading further in the transcript, one of the insurance companies has 1400 medical diagnoses that trigger a recission investigation, one company has 2000 diagnoses, and one company doesn't seem to know what its algorithm is.

What a great business plan!  Take a person's money when they're healthy; if they lose the lottery and get sick, kick them out.  No wonder health care companies are making out like bandits.  

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