Today’s L.A. Times provides news of yet another insurer engaging in bad-boy rescission tactics. Instead of Blue Cross of California, now Health Net is revealed abusing its insureds by engaging in post-claim underwriting.
Post-claims underwriting is the practice of insurers thoroughly examining insurance policy applications after the policy has gone into effect and significant claims have been submitted. Only then does an insurer carefully review the application for insurance and compare it to the applicant’s medical history. If it finds any discrepancy between the application and the applicant’s medical history, the insurer cancels the policy and the insured is left holding the bag.
Post-claims underwriting by health insurers is a widespread scourge across this country. At the precise time an insured is in the greatest need of medical coverage and is most vulnerable to financial turmoil, the insurer pulls the rug out from under the person.
Health Net has to hate the way in which this story broke. It was involved in arbitration with an insured whose coverage it had rescinded in the middle of her cancer treatment. The Times asked the arbitrator to open the proceedings to public access. Health Net objected but the arbitrator, a former trial court judge, granted the Times’ request stating, “this case clearly involves very significant public interest.”
One of the most troubling facts to come to light was Health Net provided bonuses to its senior analyst in charge of rescission reviews that were tied to the amount of money she saved Health Net. This, of course, led to more aggressive behavior on her part in rescinding coverage on insureds who submitted large claims shortly after the policies went into effect. Not only does incentivizing an insurance claim reviewer to deny claims generally smell bad, it violates a specific California statute.
Our law firm recently filed a post-claims underwriting class action against Regence Blue Cross Blue Shield of Utah, one of this state’s largest insurers. My experience is that there are plenty of bad actors engaging in unfair rescissions and much need for the policing of misbehaving insurers that comes with an active plaintiffs’ bar.