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NAIC Releases Health Policy Rescission Data Draft

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Between 2004 and 2008, insurers rescinded 1,464 health policies or certificates based on conditions that were not diagnosed before the insureds applied for coverage.

The Regulatory Framework Task Force at the National Association of Insurance Commissioners, Kansas City, Mo., has published that figure in a draft summary of results from a recent rescission data call.

The task force sent the data call in October to 52 companies that wrote individual major medical policies or individually underwritten certificates from 2004 to 2008. The 46 companies that responded covered about 70% of the people covered by individual major medical policies during the period studied.

The task force ended up exempting 3 companies that did not write the kind of coverage subject to the study, and one state decided not to participate, because its companies had already responded to a similar survey conducted by Rep. Henry Calif, D-Calif., in October 2008.

The insurers that did participate said they had rescinded 27,246 of 6.7 million health policies issued during the period study, which translated into a rescission rate of about 3.7 rescissions for every 1,000 policies or certificates written, task force officials report.

All but 3 of the 1,464 policies that were rescinded due to conditions diagnosed after insureds had applied for coverage were rescinded during the policies’ contestability periods, officials report.

About 13% of the insureds who lost their coverage due to conditions that were diagnosed after they applied for coverage were psychiatric conditions. Other common reasons were muscuskeletal problems, substance abuse, high blood pressure, height and weight issues, gynecological problems, hepatitis or abnormal liver tests, and “symptoms, signs and ill-defined conditions.”

Task force officials argue in the draft that insurers that sell individually written medical coverage need the ability to rescind policies and certificates.

“It is important for companies to have the right to rescind a policy if the information provided by an applicant is both fraudulently misrepresented, and material to the condition for which coverage is being sought,” the task force officials write in the draft. “This serves not only to protect the company, but also to protect their customer base, whose premiums are based on the collective experience of the book of business.”


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