You might recall last week’s post Hospital Sues Health Insurance Company For Cheating Patients Out of Emergency Care. The allegations were depressing and outrageous, nothing less than an insurance company intimidating patients into risking their own health and safety so that the insurer could cheat a hospital out of reimbursements.
This week it’s time to look at the practice of “rescission,” whereby the insurance company digs deep into ambiguous policy questionnaires to find any excuse to deny coverage after a large claim has been made.
Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.
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If the top 5% is the absolute largest population for whom rescission would make sense [because the cost of care over time might substantially exceed premiums], the probability of having your policy canceled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two. You have three times better odds playing Russian Roulette.
Of course rescission is targeted towards the most expensive claims; there’s no point rescinding potentially profitable insureds, the point is to minimize payouts by the insurance company.
Every patient can be assured that, upon filing a major claim for chemotherapy or neurosurgery or the like, the insurance company will scour their medical records and application to find for any excuse to deny coverage.
The outrageous part is that half of these investigations of expensive claims result in rescission. Does anyone believe half of these people lied on their insurance forms? The insurance companies certainly don’t, which is why the insurance companies refused Congress’ suggestion they limit recission to cases of intentional fraud.
If you have health insurance, you have a 99% chance of never needing to worry about rescission because you won’t end up costing the company much more than you pay in premiums.
But if you find yourself at any point in that 1% — as hundreds of thousands of people in America will each year — then your odds of actually having insurance when you need it are no better than a coin toss.
Patients on government-run Medicare or Medicaid need not worry about rescission.
Like I wrote before: keep these facts in mind next time someone tells you health care reform might involve “rationing.” We’ve already got rationing, but right now it’s done for profit, and done without any regard for your health or safety.