American Health Care: Where Even the Insured Are Uninsured

In all the fuss about budget impacts and expanding coverage in the health care debate a lot of important stuff is left out of the conversation. Here’s a issue I hope is reformed in sooner rather then later from this week’s This American Life:

The story describes a couple of particularly egregious cases, such as a woman who was denied breast cancer surgery because she had been treated for acne in the past, and a person whose policy was rescinded because his insurance agent had incorrectly entered his weight on the application form.

The legal basis for rescission is that when you sign an insurance application, you are warranting that the information on the application is true; if it turns out not to be true, the insurer can get out of your insurance contract. It’s particularly nasty in practice because the insurer does not immediately investigate your application to determine if it is accurate before selling you the policy (that would be impractically expensive); instead, the insurer waits – years, in many cases – until you actually need expensive health care, and then does the investigation, which at that point is worth it because of the payments the insurer could potentially avoid. Also, you can lose your coverage for innocent mistakes, which are easy to make since the application form asks you if you have ever seen a doctor for any one of a long list of medical conditions that you are certain not to recognize or understand.

I’ve read a lot of bloggers link to this article and make critical of comments of this practice. Rightly so, but the critical issue is that looping people out of insurance simply shouldn’t be a legal practice.

Many insurance horror stories involve denying treatment either before or after the fact. Denying some types of treatment is a necessary evil. You just can’t pay for highly expensive and experimental treatments and still function. Insurance companies abuse this system claiming all manner of legitimate treatment ineligible, but no system could function without drawing a line somewhere in terms of what they’ll cover.

But why should we let insurance companies void contracts with paying customers? For one thing they’re not going to refund the customer’s previous payments. The worst aspect of this practice is most customers weren’t trying to defraud the insurance companies, but rather just made a mistake filling out a form that was designed to confuse people. But even if they were knowingly providing the insurance company false information what good does it do society to let them be denied coverage?

These patients are sick, either they pay, society pays, or they suffer. The vast majority of the time society is made worse by rescission, it simply shouldn’t be legal under any circumstances. If people buy insurance, they should have insurance.

Private insurance companies are committed neither to the wellness of their customers or even providing their customers with insurance on even a nominal level. It amazes me politicians of any political party will proudly discuss their cooperation with insurance companies which routinely victimize their constituents.

(Hat Tip to Baseline Scenario)
-Chris

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