A Congressional committee recently turned its attention to rescission, a practice where insurers retroactively revoke plans to avoid paying high costs. NPR reports: "According to a new report by congressional investigators, an insurance company practice of retroactively canceling health insurance is fairly common, and it saves insurers a lot of money. A subcommittee of the House Energy and Commerce Committee recently held a hearing about the report's findings in an effort to bring a halt to this practice. But at the hearing, insurance executives told lawmakers they have no plans to stop rescinding policies."
NPR reports: "The process begins after a policyholder has been diagnosed with an expensive condition such as cancer. The insurer then reviews the health status information in the questionnaire, and if anything is missing, the policy may be rescinded. The omission from the application may be deliberate, to hide a health condition that might have made the applicant ineligible for insurance. But sometimes there's an innocent explanation: The policyholder may not have known about a health condition, or may not have thought it was relevant. The rescissions based on omissions or immaterial conditions incensed many lawmakers."
The committee's investigators found 19,776 rescissions from three large insurers over five years, which led to savings of $300 million. "Several lawmakers at the hearing suggested there were things the companies could do right now: They could vet applications when they receive them, rather than waiting until people get sick; they could consider whether something that was omitted was related to a current health condition before rescinding; and they could be more careful to positively identify fraud before rescinding a policy" (Silberner, 6/22).