A district court of appeals in CA has ruled that insurers must review health insurance applications for accuracy before a policy is issued, rather than wait until an insured has a large claim to initiate a review. This seems like a very valid requirement, and is something I’d like to see implemented here in Colorado as well.
All too often, health insurance applications are processed quickly, with the insurance company just taking the applicants statements at face value and issuing a policy based on the answers provided on the application. More and more applications are being completed on line, with agents no longer meeting face to face with clients. Just like the person you meet on an internet dating site might not be as tall, dark, and handsome as he describes, an insurance applicant might not be as healthy as the application implies.
One section of all Colorado individual health insurance applications is a release of medical records, which when signed by the applicant, allows the insurance company access to the applicant’s medical history. People often assume that the insurance company will check medical records before the application is approved, but this is not always the case. Instead, an insurance company is within its rights to issue a policy based on the information provided on the application, and then do a more thorough review of the client’s medical history if and when the person has a claim. And the larger the claim, the more likely that right is to be invoked.
I understand that a thorough underwriting process is time consuming and expensive for the insurance company. And it makes financial sense to issue as many policies as possible – every policy means more premium for the insurance company and a larger group for spreading risk. And I have no sympathy for people who knowingly lie and misrepresent their medical histories on health insurance applications. But what about people who genuinely forget details here and there? (after all, ten years is a long time to remember, especially if you’ve had numerous health treatments over the years). These people should not be given the false sense of security that comes with having an issued health insurance policy, only to have it taken away when they need it most, during a subsequent claim. It would be better for them to be declined up front so that they could apply for Cover Colorado and know that their coverage is secure.