Arizona Republic examines health insurance policy rescissions

The Arizona Republic on Friday examined how the practice of health insurers rescinding and canceling the health care policies of beneficiaries has been "scrutinized from California to Connecticut with some states passing tough measures or pursuing regulatory actions and assessing fines to restrict these retroactive health policy voids."

According to the Republic, rescissions have been "generating many complaints to government regulators and some lawsuits claiming insurers have improperly dropped coverage." Policyholders and lawyers contend that the rescissions often occur after a policyholder is diagnosed with a costly life-threatening illness, such as cancer. However, insurers maintain that the practice is needed to prevent applicants from intentionally withholding pertinent medical history or other information to receive coverage. Insurers also maintain that the practice helps maintain and reduce costs for all beneficiaries.

State Efforts

Health Net is among the companies that have faced scrutiny over rescissions, according to the Republic. The lawsuits against the insurer are pending in California and Arizona, where lawmakers have been urging more stringent policies to address the issue. California's Department of Managed Health Care launched an investigation into Health Net and Kaiser Permanent that resulted in reinstatement of coverage to 1,000 former policyholders. After the settlement, Health Net announced that it would seek approval from a third party before canceling a policy.

New Mexico Gov. Bill Richardson (D) recently signed into law a bill that raises the burden of proof for insurers to prove fraud in policy cancellations. Arizona officials contend that the practice is not prevalent enough to create legislation.

Mohit Ghose, a spokesperson for America's Health Insurance Plans, said, "It is very clear to our members that rescissions are not necessarily the way to go. We want to make sure people are covered," adding, "You also have to have mechanisms in place to prevent fraud." The industry has made its own recommendations for improvement, according to the Republic (Alltucker, Arizona Republic, 5/30).