Aetna Inc., the third-largest U.S. health insurer, will let outside doctors decide whether to cancel coverage for sick customers suspected of obtaining policies through false or incomplete information.
The Hartford, Conn., company will give three-member physician panels the final say on rescinding individual and family policies starting today.
Aetna is the first of more than 1,300 insurers to set up binding outside reviews in every state where they do business, said California Insurance Department spokesman Darrel Ng.
The cancellation of policies after people developed costly illnesses such as cancer and heart disease became a national issue in 2006 because of incidents in California.
Stories in the Los Angeles Times over the last two years helped prompt state regulators to crack down on insurers through fines and orders to reinstate thousands of policies improperly canceled after patients ran up large bills.
State regulators have won more than $20 million in settlements over the practice from five insurers, including $10 million from WellPoint Inc. of Indianapolis. WellPoint agreed to reinstate 1,770 members. Congress opened an investigation in July.
"This issue has generated much public attention for our industry, and we want to address it head on," said Aetna Chief Executive Ron Williams, who often speaks out on health policy issues. "We want to go the extra mile when it comes to the tough decision of rescinding the few policies we must."
Aetna shares fell $2.76, or 7.2%, to $35.83. The stock has dropped 38% this year.
Insurers are supposed to check a customer's eligibility for coverage before issuing a policy, not after illness sets in, regulators said. In California, some companies did no investigating until claims for major illnesses started to be filed.
Such retroactive cancellations, known in the industry as rescissions, can saddle families with debts, interrupt treatment and leave consumers permanently uninsurable in the private market.
All insurers doing business in California eventually will be required to conduct independent reviews of cancellations, Ng said.
"This nationwide independent review process should give consumers enhanced peace of mind that they will always be treated fairly and have access to a process independent of Aetna," Williams said.
