Yesterday's hearing on health insurance rescissions before the House Subcommittee on Oversight and Investigations provided yet another example of something insurers seem intent on proving beyond a shadow of a doubt: their CEOs are their own worst enemies.  The chief executives of three of the largest health insurers in the country, UnitedHealth Group, WellPoint and Assurant, were asked directly in the hearing if they were willing to limit their rescission of insurance policies to situations where the applicant intended to defraud the insurer.  Each refused to agree to that restriction. 

There's not too much dispute about the way in which health insurers have abused rescission across the country.  I've litigated several of these cases successfully for insureds.  The insurer's overreaching is simple: when a policy has been in place for less than a couple of years and the insured has an injury or illness that leads to significant claims, the insurer has software programs that flag the claims.  The insurer than gathers medical records and goes back over the insured's original application looking for any omissions or discrepancies between the application and the insured's medical history.  If any are found, the insurer retroactively cancels, rescinds, the policy and saves itself a bundle.  The insureds don't fare so well.  When they are most financially vulnerable they find that the policy they've been relying on to take care of them, on which they've faithfully paid premiums, isn't there after all.

The L.A. Times article notes that the CEO's perspective on rescission creates doubt about whether insurer overreaching can be held in check without providing consumers an option to buy their health coverage through a government sponsored plan rather than a for profit insurance company.  As I've listened to the debate about reforming how we deliver and finance healthcare in our country, it seems that insurers present two contradictory arguments.  On the one hand, they say government provided medical coverage would degrade the quality of the nation's healthcare and create dissatisfied consumers.  On the other hand, government provided medical coverage would lead to the demise of for profit insurance by putting them at tremendous competitive disadvantage.  So make up your mind insurance industry.  Is the public option better or worse in effectively delivering high quality medical care?      

For more on insurance CEOs as their own worst enemies, consider my porcine friend William McGuire, former chief executive of UnitedHealth Group.