House committee looks at practice of revoking policies retroactively
A horrific mountain biking accident left Logan resident Heidi Bleazard hospitalized with a broken back, fractured ribs and a severe head injury that robbed her of some memories.
And then it got even worse.
Her health insurance company, Regence BlueCross BlueShield, sent her a letter five months later saying the company was retroactively canceling her family’s policy because her husband, Keith, didn’t properly disclose a back injury. Not only would Regence not pay her current bills, but the company would seek a refund for the bills it already paid, saddling the Bleazards with more than $100,000 in debt.
The practice is called “rescission” and it only impacts people who do not get their insurance through their employer. It is a rare move for an insurer to retroactively pull a policy, but it has happened to thousands of families nationwide, sparking controversies from California to Connecticut.
A House committee weighed in Thursday relying heavily on the testimony of the Utah couple to criticize insurance companies for abandoning customers in their most vulnerable times.
“What happened to the Bleazards is inexcusable,” said Rep. Henry Waxman, D-California, chairman of the House Committee on Oversight and Government Reform. “Insurers are using technicalities or trumped-up ‘misrepresentations’ to rescind policies after individuals get sick.”
Waxman said the committee would launch an investigation into the practice, which would also seek to determine if the federal government has lived up to its oversight role and if states have tough regulatory laws to protect consumers.
Keith Bleazard said he didn’t expect such action. He also didn’t know there were so many others in their same situation.
“At the time you feel all alone, it is you against the world,” he said, “I was surprised that there were other people.”
The couple and their nine children remain uninsured three years after the accident and are paying their massive debt in small monthly payments as their lawsuit against Regence plods along.
Their lawyer, Brian King, is trying to turn the case into a class action suit representing the 197 Utahns whose Regency plans were retroactively canceled from 2003 to 2006.
Regence denies rescinding policies to get out of paying medical claims.
But Heidi Bleazard doesn’t buy that.
“Only after the bills from my accident were mounting did they notify us of a problem,” she told the committee. Her husband did disclose his back injury, but their insurance agent sent the form only to their life insurance carrier. Still Regence paid for her husband’s pain medications for almost a year before revoking their plan.
Utah law allows insurers to rescind policies if there is a “material” omission on application forms.
This is a less stringent standard than is required under federal Health Insurance Portability and Accountability Act, known as HIPAA, which allows people to keep their individual health policies unless they have knowingly defrauded insurers.
The Bleazards’ attorney will formally file a complaint with the Centers for Medicare and Medicaid Services, which stays out of such disputes unless it finds that a state is not living up to the federal HIPAA standard.
Utah obviously is violating the HIPAA rules, according to Connecticut Democratic Rep. Chris Murphy.
“The state law stands in direct conflict with the federal law,” he said at the hearing.
Utah Insurance Commissioner Kent Michie did not return a call for comment.
Not only did Democrats and Republicans criticize rescission practices, it wasn’t even defended by the health insurance industry.
Stephanie Kanwit, special counsel for America’s Health Insurance Plans, said: “We know that rescission is exceedingly rare. We want to make them rarer still, we want to make them extinct.”
She said the group backs major health care reforms that would cover everyone and stop companies from rejecting people because of pre-existing conditions.
But until that happens, the industry put together a series of rescission principles to help consumers, which includes a more thorough application review that should catch errors before a company issues a policy.
The group also wants states to create independent boards, including a doctor and a lawyer, to hear disputes between customers and insurers.
Her group includes all of the major health insurance companies, including those linked to rescission scandals. Kanwit could not say how many had agreed to the group’s principles.
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