Health Care Bill Bait and Switch: Insurers Had Wriggle Room to Refuse Coverage for Pre-Existing Conditions

Two reasons that many people went along with the Obama administration’s health care reform proposal was that it was purported to extend coverage to the uninsured and would eliminate the ability of insurers to deny coverage (including rescind existing policies) for pre-existing conditions.

The latter claim was false (more on that shortly) and some gaps have already come to light. Consider this story from the New York Times, “Coverage Now for Sick Children? Check Fine Print.” Here was the sales talk:

Mr. Obama, speaking at a health care rally in northern Virginia on March 19, said, “Starting this year, insurance companies will be banned forever from denying coverage to children with pre-existing conditions.”

Here’s the reality:

William G. Schiffbauer, a lawyer whose clients include employers and insurance companies, said: “The fine print differs from the larger political message. If a company sells insurance, it will have to cover pre-existing conditions for children covered by the policy. But it does not have to sell to somebody with a pre-existing condition. And the insurer could increase premiums to cover the additional cost.” …

But, insurers say, until 2014, the law does not require them to write insurance at all for the child or the family. In the language of insurance, the law does not include a “guaranteed issue” requirement before then…

Starting in January 2014, health plans will be required to accept everyone who applies for coverage.

Yves here. So that means everything is hunky dory starting in 2014, right? Don’t assume that.

The way pre-existing conditions often come into play now is that a patient has an expensive ailment, and the insurer looks for a way to deny coverage. So they go through the patient’s medical history and find something, anything they failed to tell the insurer about, and use that as an excuse to deny coverage. And it doesn’t matter that the condition you failed to report was inconsequential, or that you failed to report it because your doctor diagnosed it late (for instance, you got Lyme disease before you got a policy, but no one diagnosed it until it was advanced Lyme disease, after you were covered).

Why can insurers use these weak excuses to cancel coverage? Because they have been able to argue successfully, that these omissions are “fraud and intentional mispresentation”.

Guess what? The draft bill preserved the “fraud and misrepresentation” out, and I have seen nothing to indicate that this language was revised. The executive director of a 150,000 member nursing organization, which opposed the bill, noted:

Insurers may continue to rescind policies for “fraud or intentional misrepresentation” – the main pretext insurance companies now use to cancel coverage.

So when will voters find out the full extent of the bait and switch? In 2014, when Obama hopes to have been voted in for his second term.

Update 3/30/10: Per reader Nimrod, it looks as if the hue and cry over the poor drafting of the language regarding child coverage has led to a climbdown by the industry. No openly crossing Obama during his momentary resurgence. But I am not holding my breath that other ambiguities in the bill will be so readily resolved in the public’s favor.

Print Friendly, PDF & Email


  1. wunsacon

    >> So when will voters find out the full extent of the bait and switch? In 2014, when Obama hopes to have been voted in for his second term.

    He won’t make it that far without people of all political stripes discovering it.

    The Dems’ best hope is for the GOP/TeaParty to continue being a bigger embarrassment than the Dems. Hard for me to believe that’s actually possible. But, the GOP/Teabaggers seem bent on re-electing Obama.

  2. EmilianoZ

    Everything’s gonna be OK. Consider the following scenario:

    It’s 2014. You’re diagnosed with a catastrophic disease. Your insurance company digs out some shit about you, some error you made filling the forms or whatever. They kick you out. Guess what? You can go to another company. They can’t refuse you under the new law. This time you just make sure you don’t do the same mistake filling out the forms. You might get kicked out a few times, but, as long as you make sure you don’t die between policies, you’re gonna be OK.

    Everything’s gonna be hunky dory, I’m sure. Obama’s looking out for the little guy.

    1. bob

      At what cost? Does a 150k a year insurance premium really save you that much on the 140k surgery and hospital stay? We can’t forget the insurance company cut.

    1. jawbone

      David Dayen at FDL writes that AHIP has decided to cover children with pre-existing conditions, to cooperate with HHS, but…ah, here it comes…it may require raising premiums to pay for such coverage.

      After a week of wrangling, the health insurance trade group AHIP announced that insurers would agree to covering all children regardless of pre-existing conditions, though they added in the same breath that they could have to increase rates to accommodate such a change. This exposes the poor drafting of this late-to-the-game regulation, because without some form of price rating health insurers can raise rates with virtual impunity, and may now feel they have an excuse to do so.

      Health and Human Services Secretary Kathleen Sebelius sent a letter to AHIP yesterday, attacking them for trying to alter the regulations passed by Congress within days of the bill becoming law. “Now is not the time to search for non-existent loopholes that preserve a broken system,” she wrote in the letter.

      After the few days of bad publicity, AHIP appeared to retract their interpretation of the statute.

      AHIP said de-linking the requirement to insure sick children from the law’s mandate that everyone buy health-insurance coverage, which goes into effect in 2014, could drive up prices in the meantime. But the group said it would do whatever HHS tells it to do.

      In a letter responding to Ms. Sebelius Monday, Ms. Ignagi said her members recognized the “significant hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition,” and pledged to fully comply with the regulations HHS is developing. The group is analyzing how much it would cost to take all comers under 19 years old.

      Well, what can we expect of profit-driven health insurance? It’s the nature of the beast (or parasite) to strive for the highest profit. It’s how they’re judged on Wall Street. And sucking people dry fiancially is how it’s done. Obama simply aided and abetted this, making it law.

      Lambert at has some thoughts on a post by Ian Welsh on how we’re in an almost pure rent-seeking economic system, where the government is used by corporations to establish the best rent streams. The fight is over who will control government to get the best terms for profit making.

      Now, Obama decided this model had to be preserved, protected. That was his choice (or the choice he was presented with?). So, he threw away the chance for real patient-centered health CARE reform.

      No Medicare (Improved!) for All was permitted to even be discussed. He got what he wanted. Or was told to get. The strongest parasites among the Big Health Industry Players (BHIP) got what they wanted.

      AHIP is one of the big winners.

  3. Paul Tioxon

    I am going to go out on a limb here. The Dems have been out of power so long they are just getting their class war bearings back. This is class war. Obama has come through. There will be more reform, more tweaking and less wiggle room for the insurance companies. As FDR saved the previous social order from total collapse, Obama has his work cut out for him. The difference is, well how can I put this with the acceptable level of intellectual patina without a graph for you econ types, this generation is a little bit softer. They have not seen first hand some of the things that made people so desperate during the depression. The 8 hour day, the 5 day work week, were barely 2 decades old. Unions were target practice for private armies, the US Army was just not that big. We were not close to being an affluent middle class society. Today, it is a different world and Obama can not just sweep away the last 40 plus years of reactionary politics, the dug in conservative propaganda agitators on radio and print. The populace is dumbed down. The Texas Governor talks about secession, the Virginia Governor wants to shield his 7th child from federal social security number oppression, dinosaurs are not real, the senate stopped for a special session to save Terry Schiavo, but let the economy burn to the ground.

    Obama has to feed the foot soldiers. He has a win, vini, vidi, vici. And now, he has to deliver more, the lesser functionaries have to consolidate the power of their legislation, expanding by regulatory fiat, setting it up for the soon to come Medicare expansion. This is not a business operation. It is nation building, do I need to keep reminding you Yves and others, Rome was not built in a day. The domestic agenda will be probed for potential wins and then expanded. Financial Re-Regulation is a no brainer. No one defends the banks, the billionaires, the Ayn Rand crowd has exited, stage right and will not be coming back. It is too tempting to beat the crap out of the banks, in public, like Joe Frazier beating on Ali. No one is going to step in between the fists and the chin. It will be a populist win, not a Clinton rule from the middle so as not to upset the moderate middle class, they have already been bloodied and want to fight. They want some pound of flesh from someone, Lehman Brothers could be quite a show, along with dragging in CEO’s in front of Senate committees and hectoring them for capital crimes against the public. You may have seen some talk of their being a change in the air. A newly invigorated Obama goes to Afghanistan. A lot of citizen militia gun nuts and other political dissidents all of sudden are raided. Obama gets bolder, makes recess appointments and says, hey, I am in charge, I have 67 million reasons to do as I please til the next election, try to over come my votes in the Senate or Congress. The only poll that counts happened last Nov 2008. So now, the Republicans have to learn to fear Obama. More trials of CEO’s, more gun nut militia shoot outs and more telling the Republican leadership to watch their mouths, this is America, not Chile, and Obama is not Allende. When the rest of the leaders around the world see Obama cracking white boys heads, and getting everyone in line, they will also have to respect them. Israel would be a good Sister Souljah moment. You want to see bare knuckle real politic by the undisputed military super power, with a 17 Navy advantage over the rest of the world, watch us turn our backs on Israel for 24 hours, and get a taste of what alone in the world means. There are a lot of ways to test someone who gets used to wielding power. Getting a big win against difficult odds and unwavering, implacable Republicans is a good start. There will be much probing to see just how much power and how far the envelope can be pushed, but it has just started. I would be more concerned for the insurance companies over the next 5 to 10 years, they have become the official punching bag and again, I don’t hear any one rushing to their defense.

    1. eric anderson

      Paul, you are out on that limb… the limb predicated on a belief that Obama is actually interested in helping the people. This, after the bankster bailouts, no prosecution of massive fraud in the finance industry, wimpy bank reforms, and stimuli which amount more to political payoffs and pork than an actual foundation for future growth.

      You have an amazing amount of faith.

      1. charcad

        Twilight Zone theme music would be appropo here.

        I am going to go out on a limb here.

        Nah. You’re doing better than that. You’re on a trajectory to depart the solar system and maybe the galaxy.

        This is class war. Obama has come through.

        It is and he sure did. The Billionaire Boys Club that backed Obama have gotten unlimited returns on their comparatively tiny investments. Facilitated by bug eyed rotor beanie cap wearing Looney Tunes characters like you.

      1. NotTimothyGeithner

        Hell, the modern Democratic Party isn’t even my father’s Republican Party. Now thats just sad.

    2. Chris

      Paul you had one thing right. Republicans need to fear Obama. I have feared about since about 2007, and now my worst nightmares are becoming realities. Obama certainly is building a nation—and that new nation in not America.

  4. Jojo

    I am sure that this is only the first of MANY loopholes. After all, the lawyers have 2700 or so pages to work with!

    I contend that Congress regularly makes things complex because it allows them to play both sides of the fence with the the voters and the lobbyists.

    “Make everything as simple as possible, but not simpler.”
    — Albert Einstein

  5. Martin R

    One of my biggest worries about the bill, which admittedly I know fairly little about, is that in none of the coverage I have heard or read does anyone address the cost to insure yourself if you have a preexisting condition. I heard one woman briefly mention on NPR once that it would probably mean a premium higher than the average but not much higher. I am highly skeptical of that claim. If overall health care cost are not brought down, which I think is dicey with this legislation at best, then what is to stop insurance companies from offering policies but at prohibitive expense to those with preexisting conditions. The argument I hear is that being offered some sort of policy is better than being uninsurable…we’ll see, if the cost of the policy is close to the per year out of pocket expense with no insurance we haven’t gained a thing other than sending massive amounts of new clients to the insurance industry.

    1. run75441


      This is where the 80:20 and the 85:15 MLR comes into the place. An insurance company can not arbitrarily overcharge for the hell of it. If the insuree is an individual, 80% of the insurance premium must go for costs. Furthermore there are ratios to be applied to the cost of the lowest cost insuree.

  6. eric anderson

    The more I learn about this bill, the more I am inclined to believe that it was designed to fail. Obama said early in his campaign that a single payer system was his ultimate goal — you can watch on YouTube if you doubt this. What is the strategy to bring that about? Destroy the current system, then in desperation people will accept Obama’s desired outcome.

    Or, if you prefer the alternate conspiracy theory, Obama is just a tool of corporate America, and this is designed to rape the people for the benefit of the health care industry.

    Take your pick. But here’s the rub. The best laid plans of mice and men…

    1. Moi

      Yeah – it’s 11th dimensional chess. It couldn’t possibly be because Obama is a neoliberal who is (1) interested in preserving the existing health insurance companies, and (2) is bought and paid for with the $2 million in campaign contributions he received from the health care sector in the last presidential campaign.

  7. Movie Guy

    You’re correct, Yves.

    The news media and experts should have pointed out that pre-existing condition inclusion did not apply to adults based a review of the bill language.

    As importantly, the potential denial of claims remains firmly in place. No question.

    This is one big con job.

    One might think that you could cover yourself when applying for a health insurance policy by stipulating that you had every known disease on the planet, smoked two or more packs a day, and drank until blind. All fine and good, but you couldn’t afford the policy.

    There were some good elements in the legislation, but eliminating exclusion for pre-existing conditions for adults, and insurance provider polcy search and destroy missions were not among them. Nothing has changed on that front. Game on.

    Isn’t it grand?! What a country…

    1. run75441

      My, my Movie Guy . . .

      The bill was always a work in progress and the final result will be different than what we have seen today with or without Repub help. If the insurance companies wish to play hard ball, Congress will enact the necessary change. Furthermore the MLR will restrict how much they can charge.

  8. John

    No single payer for America in our lifetimes.

    If this Democrat corporate-give-a way plan fails we are going to get the Republican good-luck-buddy-you’re-on-your-own-if-you-aren’t-rich health care plan.

  9. T. Rex Bean

    Yes, this bill is imperfect. So what. It’s the biggest move in the right direction this country has taken in a long time. Ms. Smith, do you really think Obama is playing a game of “bait and switch”? Why do you think he’s beholding to the insurance lobby? His mother…ah, you know the story. I don’t think Obama’s “The One” — he’s too moderate — but he’s sure an improvement on the Bush regime. Or anything McCain/Palin would have come up with. Now there’s a real nightmare.

      1. T. Rex Bean

        I’ll think on this. But you can’t have it both ways. “Bait and switch” implies conscious deception. If he believes his own Pr (and who doesn’t?) he’s deluded, not a knave.
        Man, I wish I was smarter and had more time to do this.

        1. Yves Smith Post author

          I don’t see the two at all as inconsistent. “Bait and switch” means you were sold one thing and delivered something different. Obama may sincerely believe his non-reforms are reforms, although I lean towards a more cynical assessment, that he thinks this is all that can be done, that this is plenty good, that he is somehow in denial about how much he conceded to Big Pharma and the insurers, and like all politicians, isn’t above overselling his “achievements”.

          But the gap between the hype over the bill and what is really is still constitutes bait and switch.

          1. run75441


            I disagree and the means to correct the problem exists in the Health Department and in Congress yet.

            “Health and Human Services Secretary Kathleen Sebelius wrote the head of an insurance industry group, America’s Health Insurance Plans (AHIP), warning that she’s prepared to issue regulations on top of new healthcare law to ensure children’s preexisting conditions are covered.

            Unfortunately, recent media accounts indicate that some insurance companies may be seeking to avoid or ignore a provision in the new law that prohibits insurance companies from excluding children with pre-existing conditions from coverage,” Sebelius wrote.

            To ensure that there is no ambiguity on this point, I am preparing to issue regulations in the weeks ahead ensuring that the term ‘pre-existing condition exclusion’ applies to both a child’s access to a plan and to his or her benefits once he or she is in the plan,” the secretary added.”

            Yves, this is a work in progress as I have stated before and Maggie Mahar has also stated. The final bill may indeed be different then what has been passed as nothing has been fleshed out entirely. So the language is somewhat vague. At least they are bellying-up to the bar on the issue.

            Of bigger concern with little fanfare is Financial Reform on Wall Street and with Commercial Banks, the changing of the 2005 Consumer Protection and Bankruptcy Act, and Mortgages. $8 trillion pumped into Wall Street by the Fed besides TARP and other programs. Healthcare is a drop in the bucket and spread over 10 years in comparison.

            Healthcare Reform for the average “Joe” is the most important issue to be addressed since Medicare.

        2. Doug Terpstra

          ‘“Bait and switch” implies conscious deception. If he believes his own Pr (and who doesn’t?) he’s deluded, not a knave.’

          T Rex, as an early snake-oil buyer, it took some time for me to lose the illusion that Obama was not a conscious deceiver, a “knave”.

          But for a truly great deceiver, it’s enough to fool most of the people some of the time, and in this Obama is reagan 2.0. People with lives beyond politics see only various slices of puzzling disappointments, but with good neural linguistic programming the soothing Barry-tones keep hypnotically reassuring them that everything is fine, and depsite the dangerous rise in temperature the frogs stay in the pot until it’s too late.

          It may already be too late; democracy looks to be brain-dead from toxic tea parties, and the republic looks more like a fascist empire.

          Beyond the wealthcare farce, there is an undeniable pattern underlying the inadvertent ‘gaffes’ and misses to give you a clear of Barack the Knave, the neo-confidence serpent oil salesman. Here are a sufficient number of those troubling dark puzzle pieces, just the topics, assembled to resolve the image of deliberate deception, quite clearly, IMO:

          1. The Health Insurance and Big Pharma Profit Protection Act
          2. No change in NAFTA, SHAFTA, or GATT
          3. Finacial regulatory reform stalled and diluted
          4. Guantanamo still open; Abu Ghraib reclassified
          5. Extraordinary ‘rendition’ continues as before
          6. FISA untouched; illegal surveillance continues
          7. Gay rights stalled
          8. Union Employee Free Choice Act gutted
          9. Lobbying and bribery accelerate at industrial scale
          10. Cuba embargo continues as before
          11. Bluster versus diplomacy toward Iran
          12. Israel continues settlements and war crimes
          13. DOJ inaction on Wall Street fraud or war crimes
          15. Broken Promises to Family Farmers
          16. Oil Drilling in Arctic off Alaska (Erika Bolstad)
          17. Cap and Fade on climate change action
          18. Refusal to sign International Mine Ban Treaty
          19. Patriot Act renewed, gutting Feingold protections
          20. Secret deals and coverups increase.
          21. Wars escalated and expanded.

      2. Vinny

        “He is not a moderate. He looks more and more like the Manchurian Candidate.”

        Wow! Excellent description of the guy.


        1. Cynthia

          I don’t think that Obama is being brainwashed by Wall Street elites into using his presidential powers to help them accumulate even more of our nation’s wealth. I think he’s more than willing to do this for them, and in exchange for being such a willing partner of theirs, Obama will be rewarded with a portfolio full of riches upon leaving office. So I think that Obama is more of a sellout than he is a Manchurian candidate.

      3. Robespierre

        The most successful brainwashing act ever perpetrated on Americans is the idea of a left and a right on the political parties. Both parties and the president for many years have manipulated the citizens into believing that there are differences between them. There are none. They both have the same masters and it is not the people. If Obama and the Democrats wanted real health reform one of the ways to achieved would have been to let all citizens to buy “medicare insurance” before 65. Health insurance companies are leaches that add no economic value to health care

  10. Jojo

    Another thing I haven’t seen mentioned anywhere is a discussion of how deductibles and co-pays will work with this new system.

    For someone who can’t even afford medical insurance right now, getting a plan with deductibles in the thousands of dollars is not going to work.

  11. Jojo

    The NY Times had a slew of articles on the health reform law on Monday.


    March 29, 2010
    Consumers’ Big Question: What’s in It for Me?

    March 29, 2010
    No Matter What, We Pay for Others’ Bad Habits

    March 29, 2010
    Law May Do Little to Help Curb Unnecessary Care

    March 29, 2010
    Overhaul Will Lower the Costs of Being a Woman

  12. altruance

    What does the market know about health care reform anyways? The market with all of its flaws is a very good predictor of future events. From analysts, hedge funds and institutional investors, a wide array of experts have looked at the impact this reform would have on health insurance company bottom lines and they have decided that it is minimal.

    This supports two things. The first is that these reforms were not that major and second that you should not expect any future pressure to lower health insurance premiums. If premiums were expected to come crashing down you would have seen the market price in lowered profit margins on these stocks. The market did not price this in because it is not going to happen.

  13. Edward Lowe

    I have said it before, and I will say it again. Barack Obama is the last neoliberal. Sure, not the hyper deregulator ala Reagan, but NOT FDR. His supporters just want to see him as a success no matter the naked corporate agenda he has supported since his campaign. Since, his supporters seem to be fairly well-off, they are not the one’s impacted most by the policy mix he and the Dems favor (which is essentially the same pro-corporate mix as Reagan, Bush I & II, and Clinton). Well, other than the debt slavery, but most Americans see that as a “normal” part of the middle-class contract.

  14. JPF

    The “fraud and misrepresentation” language applies to faking your income and other schemes for receiving a subsidy and not preexisting conditions. At least that’s the way I interpret the language. But then again, I’m not a lawyer and I’m not sure what version of the legislation actually made it into law.

  15. anonymous

    Hi Yves,

    You do realize that there’s absolutely no semantic difference between the term ‘tea-bagger’ and ‘faggot’, don’t you?

    The perjorative hate-term ‘tea-bagger’ belongs to the same linguistic catagory as ‘queer’, ‘nigger’, ‘kike’, ‘chink’, ‘jap’, wop’, ‘gyp’ etc, etc, etc.

    ‘Tea-bagger’ is used in precisely the same way the ‘N’ word was used for years. I strongly encourage you to cleanse your site of this sort of hate speech. I can’t frankly imagine you tolerating a similar item, such as ‘faggot’ under any circumstances.

    Thanks as always for the superb insights, links, and analysis. I’ve especially enjoyed some of the recent guest posts.

    1. Douche inspector


      I regret to inform you that you are indeed a douche.


      Douche Inspector #23

    2. Yves Smith Post author

      1. I suggest you learn to read more carefully. Does “tea bagger” appear anywhere in the post?

      2. That expression is regularly used on Fox and other outlets aligned with the movement. It can hardly be seen as a pejorative.

  16. MementoOfLaw

    It’s good to see that I’m not the only one who sees health care costs skyrocketing for those who don’t have employer policies. The bill forces people to transact on both sides, both by fining those who don’t have insurance and forcing the insurance companies to insure everyone. This article made me realize that this kind of economic complusion just doesn’t mix well with a free economy.

  17. jawbone

    You’re homework assignment for tomorrow is only about 30-40 pages of reading, students. Be prepared to discuss the readings on Thursday with a quiz on Friday.

    (Thanks for the good listing or articles)

  18. Paul Tioxon

    Anyone see firedog lake updates on student loans? Looks like a big public option for college ed. How much does this crowd donate to DNC or otra PACs?

  19. Fred

    If they can’t turn you down for a pre-existing condition, then your failing to mention a condition on the application has no bearing on whether they issue the policy – that is, it’s not fraud. I don’t think this provision matters at all. I believe they are also prohibited from pricing the policy except on several demographic factors, like age, sex, and where you live. So as long as you get those factors right, you can’t be acccused of fraud.

  20. Paul Tioxon

    Energy and Commerce Contact: Karen Lightfoot (202) 225-2927
    Ways and Means Contact: Matthew Beck (202) 225-8933
    Education and Labor Contact: Rachel Racusen (202) 226-0853

    March 24, 2010

    Tri-Committee Chairmen Statement

    WASHINGTON, DC — Reps. Henry A. Waxman, Sander M. Levin, and George Miller, the chairmen of the three committees with jurisdiction over health policy in the U.S. House of Representatives, issued the following statement today regarding the elimination of pre-existing condition exclusions for children, which is included in the historic health care reform law:

    “Under the legislation that Congress passed and the President signed yesterday, plans that include coverage of children cannot deny coverage to a child based upon a pre-existing condition. We have been assured by the Department of Health and Human Services that any possible ambiguity in the underlying bill can be addressed by the Secretary with regulation.”

    “We fully expect that this legislation will prevent insurance companies from denying coverage. The concept that insurance companies would even seek to deny children coverage exemplifies why we fought for this reform effort and will continue fighting to ensure all Americans have access to high quality, affordable care.”

  21. hungry4food

    ask yourself , once you read all the links below , might this Government reform of health care and cap and trade legislation have been planned , to bring the people under control for the sake of all mankind as the Club of Rome is Quoted in this link as saying that you and me , we are the Enemy ; our President should be asked if He agrees with the Mission statement by Club of Rome here
    Population growth should be curbed: conservationist Goodall
    the plan of the population reduction

    Resource Load Carrying Capacity and K­phase Technology

  22. Francois T

    it looks as if the hue and cry over the poor drafting of the language regarding child coverage…

    Quid? Poor drafting?

    Ho! Ho! Ho! said Santa to the kids.

    Do you know who drafted this language?

    Some WellPoint’s VP (or Senior VP) for Governmental Affairs; she was dispatched, with a team, to Max Baucus’s office for nearly 2 weeks and “helped” those clueless politicians “understand” the subtleties of the health care insurance industry. She even pushed the generosity to write entire portions of the bill.

  23. Lydia L. Pineault

    If you decide to deny me coverage, because I filled out the forms improperly or I withheld some deeply important information that I was supposed to reveal. (i.e. “fraud or intentional misrepresentation”) maybe I could sue your a*s for name calling, huh? defamation of character (i.e. your calling be a stinking liar) wonder how that would play out?

  24. thefncrow

    What you’ve missed is that the fraud or misrepresentation must be of a material fact.

    Right now, the patient’s whole medical history is material. The health insurance company examines it and uses it to determine whether to extend coverage and, if so, what the premiums are.

    In 2014, though, guaranteed issue kicks in, so the insurance companies can’t outright deny anyone insurance. Further, they’re restricted to setting the premiums based only on the whether it’s a family or individual policy, as well as the applicant’s age, region, and tobacco use.

    Right now, insurance companies can find some doctor’s visit you didn’t include on your application and use that as an excuse to drop you because your whole medical history is material. They can claim that, had you revealed that illness/doctor’s visit/etc, they would have charged you higher premiums, or refused to issue you a policy.

    In 2014, though, your medical history stops being material. The only information material to your insurance coverage is your age, where you live, and whether you smoke. If you tell the truth about those things, then it’s impossible for the insurance companies to claim fraud or misrepresentation of a material fact. Even though they still have the “fraud or misrepresentation” language, the number of items they can claim “fraud or misrepresentation” about shrinks to those 3 pieces of information. Don’t lie about those, and the insurance company has no grounds for rescission.

Comments are closed.