Coverage denials by 4 major insurers rise nearly 50%

Preexisting conditions were used to reject more than 651,000 applicants during a three-year period, says a House committee report.

By Chris Silva — Posted Oct. 25, 2010

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A government investigation into the policies of four of the nation's largest insurers shows that during a three-year period, they denied health care coverage to more than 651,000 people based on prior medical history.

In addition to denials in the individual health insurance market, the House Committee on Energy and Commerce discovered that from 2007 through 2009, Aetna, Humana, UnitedHealth Group and WellPoint refused to pay 212,800 claims due to preexisting conditions. The refusals numbered about 67,200 claims in 2007, 74,650 in 2008 and 70,900 in 2009, the committee stated in its report, released Oct. 12 by Chair Henry Waxman (D, Calif.) and Rep. Bart Stupak (D, Mich.).

The number of people denied coverage also increased during the three-year period, from 172,000 in 2007 to 257,000 in 2009, an increase of nearly 50%, the lawmakers reported.

"Each company had business plans that relied on using preexisting conditions to limit the amount of money paid for medical claims," the report said. "In one document, executives devised a plan for strategic growth in the individual market that identified areas of opportunity to be 'improved preexisting exclusion processes, tighter condition and large claim review, [and] tighter underwriting guidelines.' "

The report said that, according to internal corporate documents, insurance company executives were considering practices such as denying payments for prescription drugs related to preexisting conditions, linking additional claims to preexisting condition exclusions, and narrowing the definition of prior creditable insurance coverage.

The health system reform law enacted in March prohibits using preexisting conditions to deny coverage or claims, although those rules don't go into effect for adults until 2014.

Insurers respond

America's Health Insurance Plans said insurance companies have been in favor of reforming the individual insurance market to end preexisting condition exclusions and discontinue ratings based on health status and gender.

"Health plans are committed to providing the most affordable coverage possible to the millions of people who rely on the individual market for their health insurance," said Robert Zirkelbach, spokesman for AHIP. "In the current individual market, applicants undergo an underwriting process to discourage people from purchasing coverage only after they need medical services, which drives up costs for all policyholders."

Mohit Ghose, spokesman for Aetna, said the insurer is committed to working on payment and regulatory reforms that will address cost drivers that increase premiums.

"The recent reports from the Committee on Energy and Commerce document what many health insurers, including Aetna, have been saying for years -- that the individual market needs to be reformed so we can improve access for all customers," he said. "However, we must recognize that improving access without also addressing the underlying issue of rising medical costs will lead to higher premiums for many consumers who want more affordable insurance options."

Humana and WellPoint deferred to AHIP when asked about the report, and UnitedHealth Group did not return calls seeking comment.

The American Medical Association, however, believes the insurance industry may not be doing enough to ensure that the practice of denying or refusing to pay for claims is stopping as quickly as possible.

"This report shows that insurers have too often put profits ahead of patients," said AMA President Cecil B. Wilson, MD. "The new health reform law will prevent denials of coverage based on preexisting conditions and allow patients to continue receiving medical care from their physicians."

Reforms in effect for children

For children, the portion of the law that prevents companies from denying insurance based on preexisting conditions became effective for policies issued on or after Sept. 23. For everyone else, the ban takes effect Jan. 1, 2014.

But the transition to the new policies the law requires has not gone as smoothly as the administration had hoped. A few days before the Sept. 23 deadline, many insurers said they would stop selling new child-only policies, saying the requirements made the policies too risky.

Kathleen Sebelius, secretary of the Dept. of Health and Human Services, sent a letter Oct. 13 to the National Assn. of Insurance Commissioners outlining steps she said could help preserve coverage options for children, regardless of their health status. This includes states or insurers creating open-enrollment periods during which parents can purchase coverage for children who are without access to employer-based plans.

The secretary noted an agreement announced Oct. 13 between the Maryland Insurance Administration and insurers Kaiser Permanente of the Mid-Atlantic States and CareFirst BlueCross BlueShield for those companies to issue policies in the child-only insurance market. That is a new offering for Kaiser.

HHS said it would do whatever it can to encourage health insurance companies to continue to offer child-only health insurance policies. That could include drafting a federal regulation to create nationwide limits on insurance enrollment periods so that parents do not have to wait until their child gets sick to buy coverage.

"That's something we're very seriously considering and talking to the industry about," Jay Angoff, director of the HHS Office of Consumer Information and Insurance Oversight, said during an Oct. 12 conference call with reporters. If that would result in companies who are ending child-only coverage restarting that coverage, that would make a lot of sense, he said.

However, Angoff said HHS would prefer states to act. Writing a federal rule would take some time, but many states could impose their own enrollment rules quickly.

Seniors affected

According to a report from the Kaiser Family Foundation in 2008, 15.7 million adults younger than 65 received their health care coverage through individual health insurance policies.

Insurance companies screen applicants for preexisting medical conditions and, according to the committee's Oct. 12 report, use the information to deny insurance coverage outright, charge higher premiums or exclude coverage for claims.

Waxman and Stupak said they requested documentation on preexisting claims from the four insurers on March 2 and received more than 68,000 pages of documents.

"Internal company documents show that this increasing use of preexisting conditions to deny or limit coverage would have continued unabated if Congress had not passed health reform legislation," according to the House report.

A study released in May by Families USA, a health consumer advocacy group based in Washington, D.C., found that 57.2 million people younger than 65 have at least one diagnosed condition that could put them at risk for denial of coverage based on preexisting conditions.

Though every age group is affected by preexisting conditions, the Families USA study found that older Americans are much more likely to have such a condition. More than two in five adults 55 to 64 have a preexisting condition that could lead to denial of coverage, the study found.

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Insurance denied

The number of applicants in the individual health insurance market who were denied insurance because of preexisting conditions increased 49% between 2007 and 2009, according to a House Energy and Commerce Committee study of records from four major insurers.

2009 257,000
2008 221,400
2007 172,400

Source: "Coverage Denials for Pre-Existing Conditions in the Individual Health Insurance Market," House Committee on Energy and Commerce memorandum, Oct. 12 (link)

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