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Health Insurers to Ban Dropping of Sick Customers

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April 29 (Bloomberg) -- Health-insurance customers won’t risk losing their coverage when they become sick under an industrywide ban beginning in May on the practice known as “rescissions.”

WellPoint Inc. and UnitedHealth Group Inc., the biggest U.S. health insurer by sales, said earlier this week they would no longer cancel customer policies without evidence of fraud or intentional misrepresentation.

Companies will end the practice beginning in May, Karen Ignagni, chief executive officer of America’s Health Insurance Plans, the industry’s lobbying group, said yesterday in a letter. The health law signed by President Obama in March would have required insurers to stop all rescissions in September.

“Our community is committed to implementing the new standard in May 2010 to ensure that individuals and families will have greater peace of mind when purchasing coverage on their own,” Ignagni said.

This is the second time that health-insurance companies have opted to act before the law’s requirements and implement new regulations from the health care overhaul. Earlier in April, insurers announced that they would immediately begin a policy letting dependents under the age of 26 stay on their parents’ plans.

White House Push

The companies have done so partly at the prodding of Democrats in Congress and the Obama administration. On April 27, Democratic chairmen of three House health committees wrote a letter asking the insurers “to end any such abusive practices immediately.” The letter went to WellPoint, based in Indianapolis, Indiana, UnitedHealth Group, based in Minnetonka, Minnesota, Kaiser Permanente, based in Oakland, California, Assurant Inc., based in New York, Humana Inc., based in Louisville, Kentucky, the Blue Cross Blue Shield Association, based in Chicago, and Aetna Inc., based in Hartford, Connecticut.

Cigna Corp. will stop rescissions starting on May 1. “Rescission has not been an issue for Cigna,” said Tom Richards, senior vice president of U.S. products for the Philadelphia-based company, said today in a statement. “However, by voluntarily implementing another provision of health care reform legislation ahead of its intended effective date, we are providing our customers with the peace of mind.”

When the company does go ahead with a rescission because of fraud or “intentional misrepresentation,” it will have a third party review the decision, Cigna said in the statement.

‘Writing on the Wall’

House Ways and Means Committee Chairman Sander Levin, a Michigan Democrat, was one of the lawmakers who urged insurers to stop rescissions early. “There is a lesson to be learned here. These companies have seen the writing on the wall and decided to align their practices with the law of the land even before they are required to do so,” Levin said in a statement responding to insurers’ announcement.

The White House applauded the move, as well. “It’s heartening to see that the insurance companies who employed these terrible practices -- and fought reform -- are coming around doing the right thing by instituting the ban right away,” Nancy-Ann DeParle, director of the White House Office of Health Reform, said in an e-mailed statement. “We’ll be watching closely and holding them to their word.”

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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