Insurers getting more creative in denying coverage?
The Texas Medical Association is warning of a growing insurance industry practice of canceling an insurance policy after the insured seeks coverage for a catastrophic illness. The patient believes they have coverage in place, but the carrier scours the original application to find reasons to cancel or rescind coverage. This article from Medical News Today describes the process:
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.
Certainly, fraud does exist and an insurer needs accurate information to make underwriting evaluations. For example, there is no excuse for failing to list prior cancer treatment or a heart attack. But should an insurer be able to rescind coverage for a woman's breast cancer because she failed to list prior treatment for acne on her application? Unfortunately, I believe this is a growing problem. I represented a woman last year who was originally approved for long term disability payments. Weeks later, she received a letter from the insurance company rescinding the disability policy because she failed to list her weight on the insurance application. Of course, the company had no problem accepting her premiums for two years and never bothered to explain how weight would have caused the mental disability. We had to file suit in Federal Court in order to have the insurance company pay even a portion of the benefits owed. This wasn't a fly by night small carrier. Instead, it was one of the larger, publicly traded insurance companies. The law often doesn't favor the insureds in this circumstance and new legislation is needed to protect the disabled and sick who paid for insurance and believed they were covered. I urge anyone caught in a rescission trap to contact a lawyer as soon as possible.