Has your coverage been dropped?

Marketplace Staff Feb 2, 2007

VIGELAND: Lots of people aren’t lucky enough to have their health insurance covered by their employer. So some buy their own insurance coverage. But a new trend is emerging within some insurance companies: they write the policy and accept the premiums, but as soon as you make a claim, they revoke it. And you’re left holding the bills.

Jerry Flanagan is with the Foundation for Taxpayer and Consumer Rights. Jerry, can you give us a real-life example of this?

FLANAGAN: One of the recent cases of Blue Cross: a little girl — she was about four years old, before her parents enrolled her in her Blue Cross policy — had had a bump on her chin. They went to the doctor and the doctor said “There’s no problem here, she’s four years old. Four-year-olds have bumps on their chin now and again, don’t worry about it.” Four or five months into the coverage, she developed a tumor in her jaw. The surgery was conducted, and when the doctor in the hospital sent their bills to Blue Cross, Blue Cross went back and looked at the medical record and found that the parents had taken the daughter months before enrolling to see the physician about a bump on her chin. The insurance company called that an omission of fact, and retroactively cancelled the policy, saying that “If we’d known about that bump, we would never have had issued coverage.”

VIGELAND: So what can a patient do if this happens? Is there any recourse at all?

FLANAGAN: Well, it depends largely on what state you’re in. In California, once you’ve been retroactively cancelled, it’s very difficult to get insurance.

VIGELAND: You mean from other insurance companies?

FLANAGAN: That’s right. In California, the insurance companies are allowed to refuse to sell coverage to you if you’ve been ill before. If you’re denied coverage or if you’ve been rescinded in eight states, the insurance companies can’t refuse to sell you coverage. They can certainly charge you more. But the key issue here that people need to understand is that these problems are affecting the individual market. So these people that are being rescinded are those that buy insurance on their own and don’t have an employer who provides the coverage.

VIGELAND: How much is this really a problem where insurance companies are dumping people after they’ve had a procedure?

FLANAGAN: Well, it’s certainly true that the insurance companies claim it’s a very small number, and the data from the regulators has not been complete. But we do have some interesting anecdotal evidence that helps to give a sense of a breadth of the problem. There was a law suit a couple years back against Blue Cross and there was a deposition of one of the Blue Cross employees who worked in Blue Cross’s so-called retroactive rescission department. That employee testified under oath that her department reviewed about 1,500 policies per week.

We don’t know how many of those policies were rescinded and how many of those rescissions were for no fault of the patient. Obviously, from the perspective of the patient who’s been rescinded, even if it’s only one person, the effects are devastating on the family when they’re going through a very difficult time when a loved one’s sick.

VIGELAND: Jerry Flanagan is with the Foundation for Taxpayer and Consumer Rights. Jerry, thanks for talking to us.

FLANAGAN: Thanks for having me.

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