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NAIC Eyes Rescissions

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The National Association of Insurance Commissioners says it wants to prevent abusive efforts to rescind the coverage of health plan members.

The leaders of the NAIC, Kansas City, Mo., have written a letter about the rescission issue to the chair and highest-ranking Republican member of the House Energy and Commerce oversight subcommittee.

The NAIC is investigating rescissions and has asked a group of regulators to develop procedures for external review of rescissions, NAIC officials write in the letter.

Health insurers say they sometimes need to rescind health insurance policies because of evidence that insureds lied on their applications for coverage.

Critics of the practice say the practice can hurt consumers who forget to include necessary information, who were confused by applications or who were misled by agents or others, and they contend that insurers sometimes use the omission of irrelevant information from applications as an excuse to take back coverage issued to consumers who are facing serious health problems.

Congress itself could eliminate the problem by adopting laws that would reduce or eliminate the ability of health insurers to consider applicants’ health when deciding whether to issue coverage, NAIC officials write in their letter.

“Rescission is a practice that is largely limited to medically underwritten health insurance markets,” NAIC officials write in the letter. “All of the major health reform proposals currently under consideration would prohibit medical underwriting, thus eliminating any reasonable pretext for rescinding a policy. When paired with an effective and enforceable requirement that all individuals obtain health insurance coverage, we support this prohibition.”

Until guaranteed issue requirements became effective, the “tri-committee” House reform bill, H.R. 3200, would limit the use of rescissions to cases of clear and convincing evidence of fraud, and it would require the Health and Human Services secretary to develop standards for independent third party review procedures, the NAIC officials write.

“The NAIC is supportive of the principles behind this provision,” NAIC officials write.

Meanwhile, the NAIC has examined insurance department complaint data from all 50 states and the District of Columbia to determine the scope of the rescission problem, NAIC officials write.

Only 56 of the 78,000 confirmed complaints received in 2007 dealt with rescissions and post-claims underwriting, the officials note.

“Of course, given the particularly harmful nature of rescissions, state regulators recognize that even one confirmed case of abuse is too many,” NAIC officials write.

The NAIC Regulatory Framework Task Force is trying to gauge the extent of the problem and develop regulations to prevent abuse of the process, officials write.

The task force will be sending a rescission data call to insurers selling health coverage in the non-group market, officials write.

The data call will cover policies rescinded over the past 5 years, and the health conditions that are most frequently cited as the basis of rescissions.


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