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March 08, 2008

Could Your Health Insurance Be Revoked When You Need It Most?

A series of troubling developments in California's individual health insurance market is bringing national attention to the problem of patients having their coverage taken away when they need it most.

Last month, an arbitration judge ordered California-based health insurer Health Net Inc. to pay $9 million to a cancer patient whose individual coverage was canceled during her chemotherapy treatments in 2004. The judge ordered Health Net to repay $129,000 worth of Patsy Bates' unpaid medical bills and awarded the 52-year-old hairdresser $8.4 million in punitive damages and $750,000 for emotional distress.

It's not just Health Net that's attracting scrutiny. Blue Cross of California, a unit of WellPoint, the nation's largest private health insurer, drew fire recently for sending letters to doctors asking them to verify patients' accounts of their health histories in their applications after the company already had approved their policies. Blue Cross has since stopped the letter campaign.

California's Department of Managed Health Care, which regulates the state's HMO plans, has been investigating consumer complaints about unfair rescissions since 2006. The agency has fined both Blue Cross and Health Net and is in the process of reviewing the practices of other companies that sell individual policies in the state, spokeswoman Lynne Randolph said.

"We don't think it is only happening in California...but California's farther ahead in terms of enforcement," she said. "We had a statute in place that companies must do underwriting up front and a consumer must willfully misrepresent their health condition on an application in order for a company to rescind. We feel that means it can't just be an inadvertent omission."

Insurers say they have a responsibility to ensure applicants are truthful about any preexisting conditions they may have so companies can accurately price policies and hold down costs for all their members. But consumer groups warn that tactics such as tying financial incentives to the number of rescissions an employee makes or involving doctors in investigations after policies have been issued aren't working and may be illegal in some states.

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Posted by healthinsurance at March 8, 2008 08:03 PM