Sep. 8, 2009 (United Press International) -- Health insurance "rescissions," in which policies are canceled retroactively after holders make claims, is fueling zeal for reform, analysts say.
Public anger at rescissions is making it easier to cast insurance companies as the villains in efforts by reformers to more closely regulate the carriers as President Barack Obama and congressional backers seek to pass sweeping legislation, The Washington Post reported Tuesday.
While there are no definitive numbers on how many rescissions are implemented by insurers, there have been enough to spark lawsuits resulting in $19 million in payouts by California's five largest insurers in the past 18 months, the Post said. That includes a $1 million settlement by Health Net (NYSE:HNT) , which reportedly admitted offering bonuses to employees who could find reasons to cancel consumers' policies.
"It's really a horrendous activity on the part of the insurers," Gerald Kominski, associate director of the Center for Health Policy Research at the University of California at Los Angeles, told the newspaper.
Insurers claim they are entitled to rescind policies when it can be shown that policyholders made misrepresentations about preexisting conditions on applications. But critics say insurers often stretch those assertions well past the breaking point.
