A few years ago, we had a client who completed an application for individual health insurance for herself, her husband and their child with a major Colorado health insurance provider. The application asked health history questions looking back over ten years, and she thought that she completed it accurately. The family was approved, and coverage issued. A few months later, her husband had a problem with his back and went to the doctor. When the claim was filed, the insurance company pulled medical records (a common practice when a claim occurs shortly after a policy goes into effect) and saw that he had been treated for back problems several years earlier. It had been before he was married, so his wife was unaware of the treatment, but it was within the ten year look-back period that the insurance company used for underwriting.
The obvious solution here is to go back, look at the medical records from the original treatment, and decide if they would have caused an exclusion or rate increase when the policy was issued (this could be done in a few weeks, the same amount of time it takes to underwrite an application that has not yet been approved). Then, backdate the underwriting to the issue date, and apply it to the new claim. And the wife and child on the policy should not have been affected at all, since their health was not in question. Instead, the insurance company suspended the policy for all three family members, and began investigating the underwriting. While the policy was suspended, premiums were still being charged, but no claims would be processed for anyone in the family (if, at the end of the investigation, the policy was kept in force, any claims incurred during that time would be paid retro-actively, but try telling your doctor that your policy is under review, and payment might be coming, someday…). We were told that the process could take a year or more. We decided, together with the family, that this was unacceptable, and got them switched to a new policy, with the husband’s back troubles noted on the application and excluded as a pre-existing condition. But at least any other claims will be processed in a timely manner.
California’s Department of Managed Health Care and Department of Insurance have released a new proposal designed to keep insurers from improperly cancelling health insurance policy, and to prevent abuse by insurers when a policy is in review. The new rules “reinforce existing laws prohibiting insurers from rescinding coverage unless they can prove policyholders intentionally omitted information or lied on a medical questionnaire.” In addition, coverage could not be suspended during an investigation (which would probably encourage insurers to speed up the investigation process) and coverage could only be cancelled for the person in question, not the whole group/family. These are excellent additions to the guidelines insurers should follow when a claim is being reviewed and a policy investigated.
On a regular basis we talk with people who think that it is unfair that insurance companies are able to ask about pre-existing conditions and use medical history to underwrite policies. But they like the idea of paying lower premiums for medically underwritten policies. You can’t have it both ways. If we all get health insurance that doesn’t take medical history into account, we’ll all be paying group rates, and people who can qualify for individual health insurance don’t like that idea at all.
We sometimes talk to people who tell us that their plan for getting around the medical underwriting on health insurance policies is to leave off details about their medical history. We always let them know that this is blatant insurance fraud, illegal, and sets them up for getting a policy rescinded. And if someone tells a bald-faced lie on an application and later has a policy rescinded, I have no sympathy for them. But what about a person who inadvertently leaves off something that happened nine years ago, and then has to go through a long limbo period after a claim is filed, not knowing whether the policy will stay in force or not? There absolutely need to be more safeguards in place to protect the consumer in these cases. At the very least the process needs to be quick and decisive and only impact the person who’s medical history has been called into question. To freeze an entire family’s policy for months while an investigation is conducted on one member is unacceptable. I would like to see Colorado adopt guidelines similar to what California has proposed.