A congressional committee will investigate health insurers’ practice of canceling coverage when policyholders get sick, its chairman said Thursday.
The problem first came to light in California, but witnesses testifying before the House Oversight and Government Reform Committee suggested that it was more widespread.
The problem affects the individual insurance market, in which 14 million Americans, including nearly 3 million Californians, purchase medical benefits on their own.
In light of proposals to expand the individual market, the committee’s chairman, Rep. Henry A. Waxman (D-Beverly Hills), said the individual market demanded more scrutiny, especially of cancellation practices.
Waxman pointed to one case in which he said a consumer lost his insurance because he failed to disclose headaches on his application for coverage.
He “was terminated because the insurer said he should have known that occasional headaches would later be diagnosed as multiple sclerosis,” Waxman said.
The committee would begin its probe by sending questions and requests for documents to major insurers.
“I understand that insurance companies need to protect themselves from fraud,” Waxman said. “But that is not what happened in California, Connecticut and across the country. Insurers are using technicalities or trumped-up ‘misrepresentations’ to rescind policies after individuals get sick and accumulate hundreds of thousands of dollars in medical bills.”
Stephanie Kanwit, a lawyer for America’s Health Insurance Plans, told the committee that rescission of coverage is a rarely used tool that is necessary to ensure that people who lie about their medical conditions do not taint the risk pool for honest consumers. If people who are unhealthy obtain insurance at the preferred premiums given to healthy people, she said, it drives up prices for everyone else.
“To assure them affordable coverage, individual insurance is generally underwritten, which means employing a process to assess risks and classify them according to their degrees of insurability so that the appropriate rates may be assigned,” Kanwit said. “Without such underwriting, most people who purchase insurance in the individual market would pay considerably more for their health insurance premiums.”