Recissions: The Actual Data

Nothing makes health insurers look more vile than the practice of recission; revoking coverage and refusing to pay claims if the insurer determines the covered individual was not honest when they completed their health questionnaire. Wellpoint is the most recent insurer to get "raked over the coals" for this practice. But how often does this practice occur? According to an article in Kaiser Health News:

Rescissions are very rare. They apply only to the individual market (less than 10% of private health insurance) and even then they occur less than 4/10ths of 1% of the time. Even when it does happen, there is almost always an appeals process where the decision is reviewed by an internal committee and often submitted to outside reviewers. Further, when insurers are wrong – as they may sometimes be – it is the job of state regulators to correct this injustice.

But while recissions rarely occur, their potential to turn into a PR disaster for companies is huge as we have seen. It makes me wonder then why health insurers were so adamant about reserving the right to do so. Perhaps they believed that the threat of recission would keep people more honest.