The availability of affordable health insurance coverage is a hot button topic in this country. Millions of americans cannot afford insurance and go without coverage. In this election year, some are proposing the individual health insurance market as a a solution to America’s health insurance crisis. A recent study published by Families USA, a consumer advocacy group out of Washington, D.C., however, concludes that the individual health insurance market is wrought with abusive practices. See Families USA’s Report.
Most of the 18 million americans who are covered under individual policies or plans, i.e., those not issued inconnection with one’s employment or membership in a group or bona fide association, can be denied coverage for pre-existing conditions. Furthermore, applicants can be denied coverage due to their medical history or conditions. Indeed, only five states prohibit insurance companies selling individual policies from cherry-picking the helathiest consumers and excluding everyone else. Even when coverage is issued, most states permit insurance companies selling individual coverage to exclude specific conditions from coverage.
The opportunity to limit risk by only insuring the healthiest members of the population allows for huge profit margins. In 45 states, including the District of Columbia, nothing prevents insurers selling individual coverage from spending less than $0.75 of every premium dollar on actual medical services or treatment. Limted risk, coupled with unfettered minimum medical loss ratios, promotes business models where profits are king, oftentimes at the expense of the insureds.
Unlike in the employer/group context, insurance companies are permitted to undewrite individual applications for insurance to determine the risk of insuring an applicant in light of his or her health history, lifestyle, and physical attributes. Unfortunately, however, some insurers engage in what is known as predatory post-claims underwriting in which little to no medical underwriting is done upon receipt of the application, a policy is issued, and when a substantial claim is made under the policy, the insurer, for the first time, requests medical records and investigates whether the applicant made any misrepresentations in the application that could permit the insurer to cancel or rescind the coverage. When an insurance company rescinds coverage, the insured is often left with substantial medical expenses. Furthermore, rescission can impede one’s ability to obtain insurance in the future. One problem with this practice is the applications ask questions about complex medical information dating back several years. Often times the questions are unclear. Most of the time the applications are actually completed by insurance agents who may not ask the question the way it is written or not ask all of the questions. In other words, most consumers are ill-equipped to answer every question on the application with precision. Incorrect answers, however, can form the basis for coverage cancellation at a later time when the insured needs coverage. This practice – of rescinding coverage after claims are made based on information that was available to the insurer during initial underwriting – is illegal in many states and is being exposed through recent lawsuits. See for example Court Awards $9M to Cancer Patient Over Cancelled Coverage.
States must pass legislation to reduce the abuses that currently pervade the individual health insurance market. Relatively speaking, Ohio is among the more consumer-friendly states when it comes to individual insurance regulation. For example, under Ohio law, an insurer cannot rescind coverage on the basis of a misrepresentation in the application without first clearly establishing the misrepresentation was knowingly made by the applicant with intent to defraud the insurance company. In other words, innocent misrperesentations cannot serve as a basis for coverage cancellation.
If you or someone you know has had their claims denied under an individual health insurance policy (includes coverage for spouses and family members) or had that coverage cancelled, you should contact an attorney to discuss your legal rights. Many of the abusive practices plaguing the individual insurance market are expressly prohibited under Ohio law.
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