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Health plan loses court battle over rescission

Records show that Assurant Health routinely targeted HIV-positive members for fraud review, though the company denies the charge.

By — Posted April 9, 2010

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The U.S. Supreme Court has declined to hear an appeal from health insurer Assurant Health over a case in which the company is accused of targeting and wrongly rescinding coverage from an HIV-positive member.

South Carolina college student Jerome Mitchell Jr. signed up for individual health insurance with Fortis Insurance (now known as Assurant) in May 2001. He was diagnosed as HIV-positive after attempting to donate blood in May 2002.

After his diagnosis, Assurant sent his case to its fraud review unit, according to court testimony.

A note in Mitchell's medical record that incorrectly suggested he'd been diagnosed in March 2001 prompted Fortis to rescind his policy, though according to testimony in his case, there were plenty of other records in his file that would have prompted a reasonable person to conclude that the note was simply misdated.

Assurant reinstated his coverage in May 2004, but Mitchell already had sued the company. The circuit court jury found in his favor and ordered the company to pay him $15 million in punitive damages. The insurer appealed the ruling.

In a Sept. 14, 2009, decision, the South Carolina Supreme Court ruled that Assurant's behavior merited punitive damages in the millions of dollars, but reduced the award from $15 million to $10 million.

Assurant appealed to the U.S. Supreme Court, which on March 22 declined to hear the case.

A company statement said Assurant was "disappointed with the decision of the U.S. Supreme Court not to review our appeal, but accepts the court's decision."

An investigative report published by Thomson Reuters uncovered evidence that Assurant had targeted not only Mitchell for rescission, but other members who were HIV-positive.

Assurant Health President and CEO Don Hamm was among the health insurance executives who testified in June 2009 before the House Subcommittee on Oversight and Investigations regarding rescission.

"We regret the necessity of even a single rescission. The decision is never easy," he told the panel.

Under the health system reform bill signed into law March 23, starting Sept. 23, health insurance rescissions are illegal except in cases of fraud.

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