I was both saddened and intrigued when I read this article. Executives from Wellpoint, UnitedHealth, and Assurant met with lawmakers earlier this week to discuss policy rescissions. When pressed as to whether their companies would be willing to limit rescission to only cases of intentional fraud, all three executives said no.
I’ve been thinking about this for the last couple days. First of all, health insurance companies have some work to do in the public opinion department. So it is a bit of a mystery to my as to why the executives who met with congress were so adamant that rescission not be limited to cases of intentional fraud.
But the flip side of the issue is that it’s tough to really differentiate between intentional fraud and accidental omission. The only person who really knows what an applicant’s intentions are is the applicant. Do we use the “reasonable and prudent person” idea here? Would a reasonable and prudent person forget that she had been hospitalized or taken to the ER? Probably not. Might she forget that she had been treated for a sinus infection six years ago? Perhaps.
When I was new to the health insurance business, I remember hearing a story about a lady who “forgot” to mention on an application that she had emphysema. She was later diagnosed with cancer and her policy was rescinded. There is no part of me that believes that a person with emphysema could answer “no” to the question about lung/respiratory conditions and chalk it up to an accidental omission. Health insurance applications are designed to eliminate accidental omission as much as possible. There are health questions relating to pretty much every body part and organ system. And then there’s a catch-all question at the end, asking for details about any conditions not specifically mentioned. Any illness that required more than a passing glance from a doctor would be tough to forget when answering such specific questions.
Some people do lie intentionally when completing health insurance applications. These people might not realize that rescission is a possibility, and might not understand what a dicey situation they’re putting themselves in. In Colorado we have a high risk pool health insurance policy that is available for people who don’t qualify for individual health insurance. Cover Colorado is far superior to getting an individual policy based on a fraudulent application.
Another problem is bad agents. Over the years we’ve spoken with numerous clients who tell us that they have condition XYZ, but mention that their last agent told them that they didn’t have to list it on their application. I have no idea what these agents are thinking. All of us know about the possibility of rescission – it’s a basic part of health insurance license training and continuing education. I don’t know if these agents are just trying to secure their own commissions, or if they honestly think that the condition is minor enough that it doesn’t need to be listed, or if they think that not listing it will make the process easier for their clients. But no agent should ever tell a client to leave anything off of an application. If a condition is minor enough to not be an issue, the underwriters will dismiss it. But that is a decision for underwriters, not agents or applicants. Any other course of action is way too risky.
The waters get pretty murky when it comes to looking at an application and determining what an applicant’s intentions were. Did the person set out to deceive the insurance company? Were they completing the application at the end of a long day, with a crying baby and a kid who needed help with homework? Did one person complete the application for an entire family, and forget to mention a treatment that a spouse had several years ago? Did they ask their agent for advice and get told that they could just not mention the condition on the application?
Several years ago, I spoke with a representative from Anthem Blue Cross Blue Shield about the issue of policy rescission. She told me that – at least here in Colorado – rescission is reserved for serious cases where significant conditions are left off of applications, and that had the conditions been revealed during the application process, coverage would have been declined. To me, this seems fair. If a pre-existing condition is revealed after the approval process is complete, it should be underwritten just as it would have been if it had been noted on the application. Trying to determine whether an applicant intentionally lied or genuinely forgot would just be speculation anyway.
Electronic medical records that allow underwriters to see complete medical histories at the time of application would greatly reduce the number of policy rescissions. Then again, there’s a lot of talk on the table right now about eliminating medical underwriting all together, which would solve the problem once and for all.