Most insurers to limit policy cancellations by May

No more cancelling policies of cancer victimsWe probably won't be seeing many more stories of people losing their health insurance when diagnosed with cancer or for any other reason except fraud. That practice will end by May for many insurers who practice it. The new health care law mandates that rescission (cancellation of an insurance policy after diagnosis of an illness) of insurance will only be allowed if a person commits fraud, and it officially takes effect September 23.

Now major health insurers are quickly picking up that tune and saying they will only drop or rescind coverage where a patient commits fraud or intentional misrepresentation. "As soon as the law was enacted, we began looking at all the provisions so we could implement reforms with the minimum amount of obstruction and offer greater peace of mind to the 200 million people we serve," Robert Zirkelbach, director of strategic communications for the American Health Insurance Plans (AHIP), told me by telephone interview. AHIP represents 1,300 members that provide health insurance coverage.

When asked if AHIP was participating in the state lawsuits attempting to stop the implementation of the new health care reform law, he said no. "Our whole focus is on implementing these reforms as smoothly as possible and as quickly as reasonable." He explained some provisions will take longer and some will require additional guidance from the Department of Health and Human Services, but provisions that can be implemented early will be.

Two of those key provisions, which were supposed to be implemented by September 23 but will be implemented early, are the mandate on dropping rescissions unless there is fraud or intentional misrepresentation and the extension of coverage for young adults up to age 26.

Here's what some key insurers have said about rescission:
  • UnitedHealth said it will limit its use of rescission immediately.
  • Humana said it already restricts the use of rescission to fraud cases.
  • WellPoint, which operates BlueCross/Blue Shield in many states, will implement the rescission rules in the new health care reform law starting May 1.
WellPoint and Humana said they already use independent third-party reviews of their rescission cases, and UnitedHealth promised to implement them soon.

Prior to this change in law, rescission rules varied state by state. In some states, an insurer can cancel a policy for material misrepresentation, which means you can make a mistake on your application unintentionally and your health insurance can be canceled. That practice will stop across the board by September 23, if your insurance company doesn't decide to implement it early.

WellPoint was under fire this week, because it came to light that it had been targeting breast cancer patients for rescission. WellPoint will end that practice by May 1. Hopefully, you weren't kicked out of insurance before that date.

In a letter to top House Democrats, AHIP president and CEO Karen Ignagni wrote, "While many health plans already abide by the standards outlined in the new law, our community is committed to implementing the new standards in May 2010 to ensure that individuals and families will have greater peace of mind when purchasing coverage on their own."

Health and Human Services Secretary Karen Sebelius pressured the companies to end this practice of rescinding policies early. Once it's ended, insurance companies that rescind a health insurance policy will be required to have a third party review of the rescission. We no longer will see cancer patients and others targeted for policy cancellation as long as the states aren't successful in killing the health care reform law in the courts.

Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Social Security and Medicare and The Pocket Idiot's Guide Medicare Part D.
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