Health Insurance Company Executives Continue to Cancel Policies After Illness Strikes

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Health Insurance Company Executives Continue to Cancel Policies After Illness Strikes

Testifying before Congress yesterday, executives of UnitedHealth’s Golden Rule Insurance Company, Assurant Health and WellPoint, Inc., parent of Blue Cross of California confirmed that their companies would continue to engage in post-claim underwriting practices on individual health insurance policies.

This discredited policy of collecting premiums and waiting until an insured person incurs expensive medical bills to cancel the policy for alleged misrepresentations on the application causes unnecessary suffering to many people who have acted in good faith. Often the discrepancy, if any, is the result of an innocent mistake unrelated to the illness requiring medical treatment.

The ethical course of action for the insurance company would be to perform an investigation of insurability at the inception of the policy or within a reasonable period, say within 60 days after the application date. This would allow the company to review medical records and ensure that the applicant’s representations are accurate. This is a very small burden for the insurance company to bear.

Instead, some insurance companies have decided to delay their due diligence until calamity strikes and policy claims are made. It is not uncommon for an insurance company to rescind the policy after giving authorization for treatment. This places their insureds in the untenable position of owing large sums of money for medical care they thought was covered.

The fact that these insurance companies refuse to limit rescissions to those instances where there is evidence of intentional misrepresentation or fraudulent conduct by their insureds makes it clear that they place their own financial interests above the well-being of their customers.