Post Claims Underwriting and Rescission Practices

The practices that insurers use to sell policies in the individual market have come under increasing scrutiny in recent years, particularly post-claims underwriting and rescission—where insurance companies investigate patients’ medical histories for unreported pre-existing conditions and retroactively cancel their coverage. According to authors of a new research paper, many insurers routinely investigate the health status of policyholders who submit large claims to determine whether any health information, even relatively minor or unrelated health problems, may have been overlooked at the time of application. If it is deemed so, insurers may rescind that coverage. While research suggests that only a small proportion of individual health insurance policies are ever rescinded, those who lose coverage in this system are typically the most vulnerable.

The research, conducted by Harbage Consulting, explores state laws, regulations and enforcement of the individual market and highlights gaps in consumer protections. Case studies in the paper offer lessons and recommendations for federal policymakers seeking to transform health insurance markets including:

  • To the extent states continue to regulate insurance under health reform, state laws must clearly and consistently reflect the federal standards.
  • Direct outreach and support on consumer rights must be expanded.
  • Regulators must collect more detailed data about the health insurance markets they regulate and use specific criteria on when to carry out a market conduct review.

The report’s authors conclude that regardless of the outcome of national health reform, the federal government must take on a larger role in regulation of the individual market to protect consumers.