Quote:
Originally Posted by Consent Withdrawn
The practice is called recission. Healthcare insurers can drop people's coverage just when they need it most in order to save money and increase profits. They can claim compliance to the law as an excuse.
A Nation of Laws -Liberty Snippet |
The application is part of your policy (it's attached at the end of it) and that's explained on the application when you sign it....it's a legal contract. You apply for coverage and if you're accepted, it was based on the questions you filled out in the application.
What happens is people either intentionally or unintentionally neglect to disclose something they should have (based on the questions they were asked and under the time period specified). Insurance company underwriters have guidelines they have to follow.......they're in writing......they have to be followed the same way for every person applying....otherwise it's discrimination. What they decide for one person based on their health, they have to do for everyone with the same health situation......the state audits them to make sure they do this.
The reason it happens when someone puts in a big claim is because, the company finds the missing info while processing the claim. If it's a large claim, the company is ordering records (which they pay for) to review and process the claim. While doing that, they see the info they didn't know about because the person didn't tell them about it so, they couldn't get records for it (since they didn't know about it or who the doctor was to get them from). A lot of times people suddenly remember things when the hospital is asking them questions that their life may depend on, things they didn't remember when they filled out the application....and those things get included in the records from the hospital (often as patient history).
The insurance company must treat this recently discovered info just like they would have if they had known about it at the time of application. They'll send a letter to the insured explaining this. If the info would have made no difference, they'll explain that....if they would have still been approved but, it would be a pre-ex for whatever the waiting period is, then they'll state that.....if it would have caused an exclusion rider whether temporary or permanent, then they'll explain that......if it would have caused a decline, then they'll rescind the policy and refund the insured all their premiums minus any claims they've had to pay and they policy is considered to never have existed. They have to follow guidelines, they have to be consistent.
It's not to make extra profit.....their profit margin is already figured into their rates. It's to maintain it, along with the rates by not having to pay claims they don't have figured into the rates. Rates are calculated using historical data to determine the frequency the company can expect people in a given region to incur illnesses and the cost to treat those illnesses. An illness that someone already has is a pre-ex that isn't figured into the rates....there's no way of predicting the number of pre-ex's (and the cost to treat them) one company may have to inherit versus another. Having to pay these claims will force rate increases to compensate for them. Unlike what most people believe, insurance companies do not want to give rate increases.....their profit margin is already built in so, they make their money from volume.....rate increases decrease volume....people drop their coverage for less expensive elsewhere....new sales also drop because of the higher rates.
In the link there's a story about a woman who's coverage got rescinded because of acne. Stories like that are rare but, I'll explain what probably happened. It wasn't just a diagnosis, it was probably the treatment she got for it. A while back doctors were prescribing Accutane to treat acne....it was a 6 month treatment that costs about $2,000 per treatment....sometimes repeat treatments were done. For a typical insurer that offers a PPO plan, they would want to put an exclusionary rider on that policy when applying, for acne and the treatment of it (if the symptoms still exist and may choose to have more treatments). This way they could still offer the person a policy if they want to accept it with that stipulation.....if not they don't have to, they can try another company.
What happens is companies like BC/BS, HealthNet, Cigna, etc. offer HMO policies, that are really not policies....they're certificates of insurance....you're a subscriber on it, not a policyholder. On this type of coverage, they either accept or decline....they don't issue exclusionary riders. As a result they'll take some pre-ex's (and cover them from day 1) that a PPO plan might put an exclusionary rider on. On the other hand, they're a lot quicker to decline an application because of a pre-ex that a PPO plan could accept but, with an exclusionary rider.
This is probably what happened with that ladies acne. Since Accutane was popular a while back, companies that didn't issue exclusionary riders, would often decline a person with acne when they had received Accutane for it in the past. Recissions like that one make the headlines....most don't because it's something much more serious that the person intentionally left off their application....in other words a majority of the time it's fraud (not always....just most of the time).
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