Report outlines why and how often insurers rescinded coverage

Prior psychiatric conditions, including depression, were the most common reason for canceling a patient's health insurance.

By Emily Berry — Posted Dec. 25, 2009

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A committee of the National Assn. of Insurance Commissioners has released a draft report detailing rescission rates and practices of major insurers across the country between 2004 and 2008.

The report comes on the heels of criticism from members of Congress, and years of state regulatory investigations and fines stemming from alleged improper rescissions of individual health policies.

The NAIC received data from 49 companies that collectively cover 80% of the individual insurance market. Those companies reported revoking a total of 27,246 policies between 2004 and 2008, at an average rate of 3.7 rescissions for every 1,000 policies issued.

In California, where the state Dept. of Managed Care issued fines to numerous companies over their rescission practices, rates began dropping in 2005, when the department's investigation began, the NAIC said.

According to the report, rescission rates nationwide peaked in 2005 and dropped thereafter, with rates at their lowest in 2008. Although the NAIC did not give a reason for the overall decline, it did admit that in California "there appears to be some connection" between the state investigations and fewer rescissions.

The report also found wide variation among states' rescission rates, from 18.5 rescissions per 1,000 policies issued in New Mexico to a low of zero in the five states where guaranteed issue laws bar insurers from rescinding policies.

Nearly half of rescissions were based on preexisting health conditions in four major categories: psychiatric, including depression (18%); hypertension (10%); height and weight, including obesity (9%); or substance use, including smoking (9%).

The draft NAIC committee report is available online (link).

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