Rescission Ban Unlikely to Affect Many Oregonians
The number of individuals dropped by their insurer was low and children are already guaranteed coverage
And the provision in The Patient Care and Affordable Care Act signed by President Obama last month, which supposedly will end rescissions – the way insurers may cancel an existing individual policy – actually leaves the door open for the practice to continue.
That’s because the law still allows insurers to rescind policies in cases where an applicant “has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact.”
Basically, the only change that makes the new law different from the law in Oregon and most other states is the word “intentional,” which is subjective.
“This is a tougher standard than Oregon currently has,” said Cheryl Martinis, spokeswoman for the Insurance Division. “We don’t require ‘intent’ in our law so I believe people who omit information unintentionally are at risk currently. What I won’t know is how many of those rescissions (currently) would not have occurred under the new federal reforms.”
In Oregon, rescissions have not occurred in great volume. In 2008, insurers rescinded the policies of 128 individuals, based on a survey by the Oregon Insurance Division of health insurers who wrote 95 percent of the individual policies.
The Division receives only a handful of complaints about rescissions each year. The details of those complaints cannot be revealed, even with a public records request.
Contrast that with California, which has 10 times the population, yet many times more the number of rescissions. An estimated 6,000 individuals were improperly dropped from their health plans in California from 2004 to 2008, not to mention thousands more likely dropped legally.
Nationwide, according to the LA Times in June 2009, “An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.”
“It also found that policyholders with breast cancer, lymphoma and more than 1,000 other conditions were targeted for rescission and that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses,” according to the LA Times.
When it comes to covering all children – another reform that takes effect this year – The Healthy Kids Program, enacted into law in 2009 in Oregon -- already guarantees coverage to all children and offers subsidies to families earning up to 300 percent of the federal poverty level.
Employers are more likely to reduce benefits or drop coverage altogether between now and 2014 when the health insurance reform law is fully implemented. That’s what happened to Barooz Bakshai and his wife Roberta Bouvette, who live in Corvallis.
Bouvette, who has multiple sclerosis and can no longer work, had long-term disability insurance through her former employer Reed-Elsevier. Bouvette pays a portion of the premium and the employer picks up the majority of the cost.
After reducing benefits and notifying the couple that Bakshai could no longer be covered on his wife’s policy this year, the company told the couple that Bouvette too would be dropped in two years, 2012.
Bakshai suspects the company looked to save money and figured the couple could obtain coverage elsewhere. In reality, Bouvette will be left with Medicare for primary coverage and Bakshai will turn to COBRA or the Oregon Medical Insurance Pool.
A request for comment from a Reed-Elsevier spokesman was not immediately returned.
Even if Bakshai and his wife are able to obtain coverage, they worry about the costs of Bouvette’s prescriptions. Just one of her drugs is $3,000 per month.
“We don’t know how we are going to pay for her medications,” Bakshai said. “I’m worried about her and what happens in 2012.”
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Regarding rescissions: besides the word "intentional," the word "material" is critical and is a legal term of art that matters. A misstatement of fact by an applicant that is not "material" to the claim which might otherwise trigger rescission, cannot do so now. And a rescission based on a non-material error would be grounds for a well-founded complaint to the state insurance division. While this will need education of consumers so they will exercise their right to complain, it does indeed provide relief from rescissions for trivial omissions or misstatements that do not "materially" pertain to the health problem leading to a claim.
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