Some Health Plans Pay Then Take it Away
AUSTIN, September 7, 2013 - Imagine being faced with expensive medical bills. Then you discover your health insurance company has retroactively dropped your coverage. To make matters worse, the insurer revoked payment on all your medical bills it already paid on your behalf.
This action is called rescission, and it can and does happen: Some health insurers look for reasons to rescind a patient's health insurance so they can escape from paying his or her medical bills. The insurers dodge their promise to provide health coverage, especially when it becomes expensive for them. What's more, the patient does not get a chance to challenge the health insurer's action before the decision is final. The Texas Medical Association (TMA) wants to protect Texas patients from this ploy.
"We believe it is unconscionable for health insurers to enroll people, then abandon them if and when the patient needs care," says TMA President Josie R. Williams, MD. "The patient has no recourse, nobody to stand up for them."
Texas law currently gives health insurers the power to rescind patients' policies. TMA believes instead patients deserve to have an independent review organization study the insurer's decision before any action is taken. TMA also believes insurers should give patients fair warning. "Patients deserve a heads-up that the insurer intends to terminate their policy, and they also deserve a chance to fix an honest mistake before being cut off," says Albert Gros, MD, chair of TMA's Council on Legislation. "To use a tactic like this against a patient's unintentional mistake is clearly abusive."
Here is how the typical rescission scenario unfolds: Someone buys a health insurance policy, fills out all the application paperwork, and pays the premium. Later the person needs medical care and submits the claims to his or her health insurer. Rather than pay the bills, the insurer pores through the patient's paperwork in hopes of finding an "out" - a mistake or omission the person made on his or her application. If it finds an error or omission, the insurance company rescinds the policy on the grounds of the mistake rather than continue to pay the person's medical bills. What's worse, the insurer then attempts to reclaim all previous payments it made under the policy. The company tells everyone who provided that patient's care while he or she was insured - hospitals, doctors, and others - that they are taking the money back.
Egregious examples are surfacing in news reports.
The Fort Worth Star-Telegram reported last summer about a Waxahachie woman who was diagnosed with breast cancer and was scheduled for a double mastectomy. But days before the surgery her insurance company, Blue Cross and Blue Shield of Texas, canceled her insurance. Its reason? She did not disclose a prior medical condition - acne - on her insurance application. She asked her congressman for help. Months later, at the congressman's urging, Blue Cross reinstated the patient's insurance, and she rescheduled her surgery. A spokeswoman for Blue Cross said health privacy laws limit her ability to discuss the patient's situation. But she told the Star-Telegram that patients have a right to appeal policy cancellations. Meanwhile, the Waxahachie patient believes her delay in care caused by her health insurer's red tape may eventually cost her life.
In another case, the Associated Press reported in February 2008 that one of California's largest health insurers, Health Net Inc., improperly paid bonuses to staff who canceled the most policies by finding similar application errors. The news report revealed that Health Net Inc. in 2004 dropped the coverage of a cancer patient in the middle of her treatments. Early this year a judge intervened, ordering the company to pay the woman's outstanding medical bills plus damages, a total of $9 million. In a lawsuit, the city of Los Angeles charged Health Net with improperly rescinding 1,600 policies in a similar manner. The article reported Health Net would implement a freeze on policy cancellations until the company sets up a third-party review panel to scrutinize cases, and it would review training procedures. "Obviously we regret the way that this has turned out, but we are intent on fixing the processes to maintain the public trust," Health Net spokesman David Olson said in the article.
Though this is not yet a common occurrence in Texas, TMA wants to protect patients from ever facing this situation.
"Health insurance applications are so confusing, sometimes people make honest mistakes in completing them," says Dr. Williams. "Insurers should not be allowed to shake a patient's world this way, and risk their health and life, over technicalities."
TMA recognizes that fraud does exist; some people intentionally commit errors or omit information from their medical histories when applying for coverage. The independent review that TMA is pushing for would identify when policyholders were intentionally deceptive. And the independent review would protect patients who made honest mistakes and whose coverage their insurer is arbitrarily attempting to rescind.
"This is another example of how patients need transparency and accountability in the health insurance market. TMA is hoping to win that transparency for them," adds Dr. Gros.
This is one of six health insurance reforms in TMA's 2009 legislative platform , titled Health Insurance Code of Conduct 2009 .
TMA is the largest state medical society in the nation, representing more than 43,000 physician and medical student members. It is located in Austin and has 120 component county medical societies around the state. TMA's key objective since 1853 is to improve the health of all Texans.