Trust But Verify: Insurers Announce They Will Stop Rescinding Coverage

Responding to a Reuters article detailing how WellPoint used a computer algorithm to rescind the health insurance coverage of breast cancer patients, Congressional Democrats sent a letter to the major insurance companies urging them to “ensure that rescissions occur only in cases of fraud or intentional misrepresentation of material fact” and “immediately institute a policy of independent, external third party review.” In less than 24 hours, WellPoint, UnitedHealth, Humana and Blue Cross of California have all agreed to implement “the new standard in May 2010,” but their pledge, while certainly significant, should not be taken at face value.

After all, federal law has required insurers to end rescissions since Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996. That law gave states the authority to enforce the rescission ban, but permitted the federal government to take over if states failed to adequately protect consumer interests. Over the last 14 years, insurers have been able to take advantage of weak state regulations to purge their rolls of costly patients without triggering a response from the federal government. What’s still unclear is how or if the federal government will enforce the rescission requirement under health reform. The new law restates the rescission prohibition and leaves enforcement of the rule to the states. The federal government is again the regulator of last resort. A fail-safe, if you will.

In short, regulators must trust but verify. As health policy analyst Peter Harbage said, “People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end. Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key.”

HHS Secretary Sebelius has issued a statement touting the new progress, but she can also encourage states to reevaluate their regulations to ensure they’re in compliance with the federal guidelines (and the insurers new promise). And if states can’t protect their residents from insurance rescissions, then the federal government must. Otherwise, it will be another five or ten years until the next crop of rescission horror stories crop up in the press.