If you listened carefully to the White House summit on health care last week, you could hear, among all the disagreements, a few points of agreement. One of those agreements is on something called rescission, where health insurance companies cancel policies after people run up heavy bills. Capitol Hill watchers say there could be legislation outlawing the practice within a few months.
At the summit, President Obama said insurance companies practice rescissions all the time. "I've got a bunch of stories in here of folks who thought they had insurance, got sick, the insurance company goes back and figures out a way to drop them," he said.
And Senate Majority Leader Harry Reid told of a constituent, Jesus Gutierrez. Gutierrez and his wife had a baby who had a cleft palate. Surgeons fixed the cleft palate, but then, Gutierrez says, his insurer wouldn't pay. "They told us that she cannot be insured," he says. "My wife and I can be insured, but she cannot be insured because she had a pre-existing condition."
Gutierrez and his wife were left with $98,000 in medical and surgical bills. They now buy their insurance from another company.
Rescission is, at least technically, illegal, except in cases where people deliberately lie in order to hide an expensive condition from their insurer, says Karen Pollitz of Georgetown University.
The Health Insurance Portability and Accountability Act says insurers can't just cut people off. But states have conflicting rules about rescissions, she says, "and it is still happening. We don't have very good data about how often, but at congressional hearings last year, three insurers owned up to 20,000 cases in the last few years." A new law clarifying the prohibition would help, she says.
People who get their insurance from medium and large employers don't have to worry about losing their policies through rescission, because as part of a large group, they don't have to fill out a health history form in order to get insurance. It's people who buy their own policies, or are in a small employee group, who have to fill out that form and who have to worry. Overall, that's a small part of the insurance market, but some of the individual cases are tragic.
Earlier this month, a jury awarded a Colorado woman $37 million in damages from Time Insurance Co., which also does business as Assurant Health. Her car was hit by a car that was fleeing police. She was in a hospital and rehab center for months, and ran up massive medical bills. The insurer wouldn't pay the bills because the woman had failed to mention in her application that she had some gynecologic problems and had once been to an emergency room because of shortness of breath, problems that were unrelated to the accident or her subsequent medical care. There's no word on whether the company will appeal.
The position of the insurance industry trade group, America's Health Insurance Plans, is that rescissions are disruptive, cause hardship to families and should be avoided. If the government passes a law requiring everyone to have health insurance, then there wouldn't be a problem, according to an insurance spokesperson. If that were the case, insurers would be freed from the concern that people will wait until they're sick to buy insurance, and wouldn't have to go back and check to see if that's what happened.
With the bipartisan support, some sort of legislation specifically preventing health insurance rescissions is likely to go through this year, says health policy analyst Alex Vachon, head of consulting firm Hamilton PPB and a former Senate staffer.
"Rescission has very strong bipartisan support," he says. The Democrats already passed a health insurance stand-alone bill this week — an antitrust bill — which suggests, he says, that Congress could also pass a stronger anti-rescission law, independently of an omnibus health care plan.