Recission Wasn't Always a Moral Crime

An editorial in today's New York Times celebrated the end of the insurance practice of "recission" - voiding of the insurance contract on the basis of fraud.

Health insurers received well-justified disgrace when they terminated coverage for seriously ill persons for what Timothy Noah in a Slate column called "chickenshit errors":

Rescission (also known as "post-claims underwriting") is the process whereby health insurers avoid paying out benefits to treat cancer and other serious illnesses by seeking and often finding chickenshit errors in the policyholder's paperwork that can justify canceling the policy. In one job evaluation, the health insurer WellPoint actually scored a director of group underwriting on a scale of 1 to 5 based on the dollar amount she had managed to deny through rescission. (The director had saved the company nearly $10 million, earning a score of 3...

Robin Beaton, a retired nurse in Texas, was rescinded last year by Blue Cross and Blue Shield after she was diagnosed with an aggressive form of breast cancer. Blue Cross said this was because she had neglected to state on her forms that she had been treated previously...for acne. Beaton eventually persuaded her congressman, Rep. Joe Barton, to twist Blue Cross' arm, but the delay meant it was five months before she could receive her operation. Otto Raddatz, a restaurant owner in Illinois, was rescinded in 2004 by Fortis Insurance Co. after he was diagnosed with non-Hodgkins lymphoma. Fortis said this was because Raddatz had failed to disclose that a CT scan four years earlier had revealed that he had an aneurism and gall stones. Raddatz replied — and his doctor confirmed — that he had never been told about these conditions (the doctor said they were "very minor" and didn't require treatment), but Fortis nonetheless refused a payout until the state attorney general intervened.

There's no way that cancelling coverage for a patient with breast cancer because she had not listed treatment of acne on her application for insurance can be justified. But see what you think about a situation that first brought the issue of insurance fraud, recission, and fairness to my attention.

More than two decades ago X became my patient after discharge from a hospital for a heroin overdose. X had a longstanding pattern of heroin use. The overdose was not a suicide attempt. X and I defined a set of treatment objectives.

I was surprised to receive a question from the administration of the not-for-profit HMO I was part of. X had enrolled as an individual, which required filling out a health statement. Several questions were about drug use. X repeatedly reported using no illegal drugs. An algorithm had flagged the hospital discharge diagnosis of "heroin overdose." The administrator asked if the diagnosis reflected a "pre-existing condition."

My immediate reaction focused on responsibility to my patient. What possible reason could justify breaking Hippocrates' 2500 year old precept: "All that may come to my knowledge in the exercise of my profession or in daily commerce with men, which ought not to be spread abroad, I will keep secret and will never reveal"? From the perspective of the doctor-patient relationship the answer was a no-brainer - I'd have to keep silent.

In addition to the hallowed medical commitment to respecting confidentiality, I thought about my patient's dilemma. I believe that a civilized society should ensure that all citizens have access to decent health care. My patient was self-employed and could only get insurance as an individual. Standard insurance practice required individuals to fill out a health statement, as part of an effort to prevent people from taking out insurance only when they knew they had a problem requiring care. After all, we don't let people wait to see the smoke before they take out fire insurance! In the U.S. system X couldn't (a) tell the truth and (b) get health insurance.

But then I thought about the other members of the HMO. The HMO budget for care was created by the premiums its enrollees paid. The enrollees were not responsible for the unjust U.S. health system. They were playing by the rules of that system. Should they be responsible for paying for X's care? From the perspective of the HMO membership, recission seemed unfortunate, but fair.

If we believe the media stories, some of the large, for-profit health plans have abused the practice of recission in order to extrude high cost patients. But apart from that abuse, insurance is only there for us when we're sick if we pay into the insurance pool when we're healthy. If we try to be "free riders" - not contributing when we're healthy and enrolling only when we're sick, recission is our just desert.

If we had the universal health system that all developed countries but us have put in place, there would be no such thing as recission. But in the unjust system we have tolerated right up to the present, recission has been an inevitable component.