Coverage rescissions draw Congressional scrutiny

September 1, 2008

Congress has joined states and consumer groups taking action against health insurers for revoking coverage for thousands of individual policy holders.

About 15 million Americans purchase health insurance through the individual market. That number could grow under health reform proposals that aim to shift from employer-based coverage to increased reliance on individual policies.

Rep. Henry Waxman (D-Calif.), chair of the House Oversight & Government Reform Committee, held a July hearing to examine the retroactive cancellation of individual health insurance policies. Similarly, "post-claims underwriting," which is illegal in some states, involves insurer re-evaluation of applications to uncover omissions or errors that would justify rescission. Waxman's investigators are seeking policy documents and records from health insurers to assess the extent of these activities.

This issue has been in the spotlight since California regulators launched an investigation in 2006 of wrongful rescissions by five plans: Anthem Blue Cross, Blue Shield of California, Kaiser Permanente, PacifiCare and Health Net. The probe resulted in more than $15 million in fines and agreements to restore coverage.

Other states have taken similar actions. But across the country, state regulators provide uneven protection for consumers, according to Families USA. To address concerns, state regulators and industry are collaborating to develop clearer application forms that would reduce confusion over what health status information insurers require. Industry also supports policies to prevent post-claims underwriting abuses and to establish state third-party review boards.

Rescission is very rare, said Stephanie Kanwit, attorney for America's Health Insurance Plans (AHIP), at the Waxman hearing. The practice aims to protect insurers and consumers from fraud that only drives up prices for everyone.

INDIVIDUAL ISSUES

The Waxman hearing was designed, in part, to raise questions about the viability of health reform proposals that would provide coverage to more Americans through the individual market. A central proposal from Republican presidential hopeful Sen. John McCain (R-Ariz.) is to reduce tax incentives for employer healthcare coverage and encourage a shift to the individual market.

However, those states with high-risk pools for individuals with pre-existing conditions already find costs exorbitant, often requiring high premiums plus substantial state subsidies. Early this year, Waxman and House Energy & Commerce Committee Chairman John Dingell (D-Mich.) asked the Government Accountability Office to assess the ability of state insurance pools to cover high-risk individuals and the costs and benefits involved. This report will be part of a broader examination of the viability of the individual health insurance market.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.