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Examining rescission

State officials' scrutiny of health insurance cutoffs should prompt a broader look at the industry.

March 01, 2008

Comprehensive healthcare reform has failed in California. But that doesn't mean health insurance companies will, or should, escape scrutiny from state officials.

As reporter Lisa Girion has ably chronicled in this newspaper, insurance companies frequently revoke patient coverage -- a practice known as rescission -- under questionable circumstances. Girion has written, for example, of cancer patients who have lost their insurance in the middle of courses of chemotherapy. Recently she reported that Blue Cross of California mailed copies of health insurance applications to doctors, asking them to check for preexisting conditions that might be used to cancel their patients' policies -- a strategy that, even if legal, violates the spirit of doctor-patient privilege. Not to mention, possibly, the Hippocratic Oath.

In response to troubling tales such as these, California officials are cracking down on insurance companies. Insurance Commissioner Steve Poizner is investigating gaps in PacifiCare's claims process that resulted in more than 100,000 violations of state law. Los Angeles City Atty. Rocky Delgadillo has set up an investigative team to examine rescissions, and has created a website soliciting reports of unfair denials of care. Assemblymen Hector De La Torre (D-South Gate) and Ted Lieu (D-Torrance) have sponsored bills designed to curb egregious rescissions. Those are worthy undertakings and good bills.

Insurance companies are not always villains. To function, they must be able to assess risk and price policies appropriately. Patients who buy individual policies do not deserve a get-out-of-jail free card that lets them lie on their insurance applications. Sometimes, services will be denied. But the vast majority of patients, who are honest, don't deserve a system that is stacked against them, with underwriting practices that make insurance unaffordable even as companies' profits rise. Some patients have become reluctant to use their insurance for treatment or medication because they fear rate hikes. Certainly, spending thousands of dollars in yearly premiums for individual policies, many with high deductibles and co-pays to boot, should buy better "coverage" than that.

We hope, as officials pay closer attention to health insurance practices, to broaden the debate. How might we regulate insurers to assure that risk management doesn't price vast numbers of people out of coverage? How can we ensure that potential price increases don't scare off essentially healthy patients from seeking necessary -- and ultimately cost-saving -- non-emergency care? What is a reasonable profit for an insurance company? And if such a profit is impossible to attain without forcing catastrophic costs on patients, what then?

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