The problems exposed in California reveal the need for focus on state rescission guidelines
The issue of health plan post-claims underwriting and improper rescission, or retroactive cancellation of an individual's health insurance after medical claims are filed, has been the focus of national media attention over the last several years. But the bar was raised in 2008, when five major California-based health plans made headlines after being investigated, fined and forced to reinstate thousands of insureds due to findings of rescission improprieties. Although the final California settlement outcomes are still up in the air, the publicity and consumer outrage around the cases triggered far-reaching consequences. Congress now has joined with states, consumer watchdog groups and individual claimants to further investigate and take action against health insurers who revoke coverage retroactively.
Although many insurers have made commendable efforts in recent years to self-regulate, the problems exposed in California reveal the need for a greater understanding of and focus on State rescission guidelines. Health plans who want to avoid similar regulatory scrutiny, hefty fines (potentially in the millions of dollars), punitive actions and consumer backlash must examine and strengthen their compliance programs before they become serious legal, financial, customer relations and public relations problems.
In the vast majority of regulatory cases, rescission problems arose because health plans failed to do one or both of the following well: make sure their underwriters did a thorough job before issuing the policy; and, ensure that any revocation of a policy was handled in a timely, sensitive, detailed and transparent manner.
1. Revise health plan applications to be comprehensive, unambiguous and accessible by consumers of varying education and comprehension levels.
With fewer than one in six adults having proficient health literacy, it is more important than ever for health plans to provide applications that are clear, specific and use language common to consumers. Applications should be specific in helping consumers understand what information is relevant to the underwriting process and what is not. For example, asking whether the applicant has frequent or chronic and severe headaches may elicit a very different response than a question asking whether the applicant ever experiences headaches. Ambiguous medical questionnaires are one of the most frequent criticisms of health plans in rescission compliance cases.
2. Establish detailed and thorough pre-enrollment underwriting processes.
Most states require that plans conduct a thorough pre-enrollment underwriting review in order to make informed coverage decisions. A plan that fails to perform a diligent pre-enrollment assessment and instead defers its medical underwriting until after it receives medical claims may be viewed as engaging in prohibited post-claims underwriting. In an investigation, plans must be able to demonstrate appropriate review processes at the application stage, and resolution to all questions about an applicant's health prior to issuing a policy. Make sure your files contain evidence of any investigations into the nature and severity of illness and injuries reported on the application and of any follow-up with applicants regarding conflicting, confusing, missing or erroneous application responses.
3. Establish appropriate underwriting training and retraining.
Investigators in rescission cases find that a high number of deficiencies result from the Plan's failure to comply with its own underwriting guidelines (e.g., did not consistently review enrollees' previous claims where the applicant indicated previous Plan coverage). Plans should establish specific and ongoing training for underwriters, establish a well designed underwriting guidebook, and provide access to medical personnel who, when needed, can interpret the potential implications of an applicant's medical history.
4. Establish a system of timely insured notification when an investigation of non-disclosure is initiated.
For consumers and regulators, one of the most egregious issues involving rescission concerns the timing of the policy revocation. Nothing makes headlines like the story of an insured whose coverage was cancelled in the middle of a life or death treatment plan, or after the $200,000 hospital bill arrives. Where coverage is revoked, make sure your company understands the state laws regarding what actions by the consumer support proper and lawful rescission. Some states require plans to prove willful misrepresentation. Make sure that details about the dates of the pre-existing condition and any treatment are fully outlined in the insured's file.
5. Establish clear, top-down company compliance guidelines
Make sure your key underwriting and rescission personnel understand the importance of meeting regulatory requirements and that each has a professional stake in the company's compliance. Ensure that the key compliance officer and your legal staff have a thorough knowledge of your state guidelines, as well as Federal regulations. In a regulatory investigation, misinterpretation of the legal or regulatory requirements is not a defense for compliance irregularities. Where legal or regulatory requirements are unclear or ambiguous, retain a third party expert to help interpret the requirements and clearly define them for the organization. In some cases, a health plan may want to go above and beyond minimum requirements and obtain a second opinion of the company's procedures from an independent review organization.
Today, with greater numbers of consumers migrating to individual health plans, scrutiny of health plan practices is sure to increase. Even organizations with strong compliance programs in place should consider reviewing and shoring up their processes and procedures to prevent unexpected problems.
Rose Leidl is president of Managed Healthcare Unlimited, a California-based company that provides research, evaluation and analysis to assist health plans, state regulators and law firms in evaluating and enhancing the processes, policies and practices regarding compliance, quality assurance, claims payment, health services delivery and access.