Dirty Little Secret in the Health Care Insurance World Is Exposed

Health insurance policy holders would expect to be paying an insurance premium so that they are protected in the event of serious illness. But that’s not always the case when the insurance company no longer sees the policy holder as profitable.

A greedy, unethical, and downright sleazy practice held by some of the world’s largest insurance underwriters has been the practice of rescinding policies of its customers using the contract technicalities. Desperate to drop policy holders who become seriously ill (many of whom have been paying their insurance premiums for years), insurance companies have encouraged its employees to find ways to terminate the policy, saving the insurance company millions of dollars in health care cost a year.

In one case, a nurse diagnosed with breast cancer was dropped because she failed to disclose a visit to a dermatologist for acne. In another, a man was denied coverage when diagnosed with lymphoma for failure to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him.

This has been ongoing for years, but only recently has it come to light. One day after President Obama outlined his proposals for reforming America’s health care system, a congressional subcommittee convened to tackle the issue of insurance policy rescission. They called upon top executives and took turns grilling them, from both sides of the aisle. When asked the question, “Would your company stop the practice of rescinding policies absent intentional fraud?” The answer given by three industry leaders was “no.”

Rep. Joe Barton (R-Tex.) stated “if a citizen acts in good faith, we should expect the insurance company that takes their money to act in good faith also." Rep. Bart Stupak (D-Mich.) was more aggressive, saying “when times are good, the insurance company is happy to sign you up and take your money in the form of premiums, but when times are bad . . . some insurance companies use a technicality to justify breaking its promise, at a time when most patients are too weak to fight back." Stupak also used this opportunity to support a public choice option in health care, saying such an option would help keep health insurance agencies honest, since customers would have other reasonable options.

Clearly, the insurance companies aren’t willing to limit policy rescissions to intentional fraud, so the government needs to step in to protect its people. California has already proposed legislature, but a problem as universal as this requires federal legislation. It will not be surprising to see a proposal coming out of the ongoing subcommittee meetings, and everyone – those for health care reform and those against – should support it. It’s not a matter of politics. It’s a matter of ethics.