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Health Insurers Agree to Stop Policy Cancellations

By Jane Norman, CQ HealthBeat Associate Editor

April 28, 2010 -- UnitedHealthcare officials announced Wednesday they will no longer cancel policies held by sick people. The company is acting in advance of a ban on the practice that's part of the new health care law.

The UnitedHealthcare announcement was followed late Wednesday by an announcement from America's Health Insurance Plans (AHIP) that health insurers in general would commit to dropping the practice of cancelling policies when holders become ill.

UnitedHealthcare's move came a day after Obama administration officials and congressional Democrats urged an end to what's called rescissions, a practice by insurers in which policyholders in the individual market who fall ill and submit expensive claims can find their coverage canceled. As of Sept. 23, rescissions will be barred unless fraud or intentional misrepresentation of a policy holder's health history is involved.

Congressional investigations have found that insurance companies scour the records of policyholders who fall ill, looking for any mistakes or omissions, even when unintentional.

WellPoint, which has been the subject of news reports that it targeted breast cancer victims for policy cancellations, said on Tuesday it would comply with the new law immediately. UnitedHealthcare said in a statement that it, too, will end its "limited" use of rescissions unless there is fraud or intentional misrepresentation of material fact.

The congressional Democrats, all committee and subcommittee chairmen with responsibility for oversight of the health care law (PL 111-148), also had urged insurers to implement an independent, external, third-party review of rescissions. UnitedHealthcare said it is looking for vendors to put in place such a system; WellPoint says it already uses reviews.

"In the spirit of the recently passed health reform legislation, UnitedHealthcare moved quickly to eliminate the practice of rescissions, except in cases of fraud or intentional misrepresentation of material fact," Gail Boudreaux, president of UnitedHealthcare, said in a statement. "We continue to find ways to ensure that the new health care reform law can be implemented effectively for the benefit of all Americans and achieve broader access to quality health."

Health and Human Services Secretary Kathleen Sebelius praised the decision by UnitedHealthcare. "The days when insurers can drop coverage when patients get sick are coming to an end but insurers don't need to wait to do the right thing," said Sebelius.

AHIP's dramatic announcement late in the day came in the form of a letter to the Democratic chairmen. AHIP President Karen Ignagni said in the letter that "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."

"We have been actively reviewing and discussing the rescissions provisions since the law was enacted and are pleased to be able to implement this reform ahead of schedule," Ignagni said.

White House Office of Health Reform Director Nancy-Ann DeParle said "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. We'll be watching closely and holding them to their word."

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