Most States Fail to Protect Consumers Against Insurance Company Abuses

First 50-State Survey of Insurance Commissioners Shows States Offer Few Protections against Common Insurance Company Abuses
By Dave Lemmon, 6/17/2008 3:43:17 AM

Washington, D.C. — A 50-state survey, released in June 2008, reveals that insurance companies in most states are not prohibited from denying health coverage to people with pre-existing conditions, refusing to pay for services needed to treat common ailments, adding huge premium surcharges for people with family histories of health problems, and yanking policies and denying payments when consumers face a rash of medical bills.

The survey was released by Families USA, the national organization for health care consumers. It is the first 50-state survey of insurance commissioners that focuses on states’ regulatory oversight of the individual health insurance market. That market is increasingly important as employer-sponsored health insurance declines and some elected officials promote its deregulated expansion.

The Families USA 50-state survey examined whether state safeguards exist in 14 categories of important consumer protections. The key findings include:

• Only five states prohibit insurance companies from “cherry-picking” the healthiest consumers and excluding everyone else from coverage.

• In 35 states and the District of Columbia, there are no limits on how much insurers can raise premiums based on an individual’s health status. An additional six states have limits that still allow dramatic variations in premiums.

• In 21 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions, such as cancer and heart ailments, for more than one year.

• In 44 states and the District of Columbia, insurers can revoke an individual’s health insurance policy without advance review by the state.

• In 29 states and the District of Columbia, insurers are allowed to deny legitimate claims of policyholders who are up-to-date with their premium payments by digging back years into their medical history and alleging that they failed to disclose, or should have known about, a pre-existing condition.

• In 45 states and the District of Columbia, insurers do not have to spend at least 75 percent of premium revenues on health care, which allows insurers to retain those revenues for profits and non-health care expenses (such as marketing).

• In 20 states and the District of Columbia, insurers can set and raise premiums without meaningful oversight.

“The individual health insurance market is still the wild, wild west for America’s health care consumers,” said Ron Pollack, Executive Director of Families USA. “It is a market with many abuses and with far too few state-level consumer protections.”

“There are two important lessons to be learned from this survey,” said Pollack. “First, the individual health insurance market has many more abuses than the group coverage market. Second, the federal government should establish some meaningful protections that would apply nationwide and that would curb the most common and harmful abuses by insurance companies.”

“I have zero tolerance for health insurance abuses,” Connecticut Attorney General Richard Blumenthal said today. “Working closely with healthcare advocates, I strongly and successfully advocated a complete ban against abusive insurance rescissions—returning health care decisions to patient and doctor, where they belong, away from insurers and bureaucrats.

“States must form a unified front to hold insurers accountable, so they keep their promises of coverage,” Blumenthal said. “My office has fought for thousands of Connecticut citizens over recent years—patients unfairly and unconscionably denied coverage, often for necessary life-saving treatment for catastrophic illnesses. I will continue this aggressive fight to protect patients and reform the health insurance system.”

“The individual insurance market regularly fails people battling cancer and those with a history of cancer,” said Daniel E. Smith, president of the American Cancer Society Cancer Action Network. “This report highlights the difficulties that consumers with preexisting conditions and other medical problems often face when shopping for health insurance, and calls out the importance of improving access to quality, affordable health care for all Americans.”

Some elected officials propose to reduce employer-sponsored health coverage and replace it with a more deregulated individual insurance market. This, according to Pollack, would be a big step backwards for health care consumers.

“Moving people from employer-sponsored group coverage to individual insurance, especially in a more deregulated context, would make a bad situation worse for health care consumers,” said Pollack. “It would mean that more and more consumers would fall prey to abusive practices of too many insurance companies.”

The findings in the Families USA report are based on a survey of all state insurance departments, as well as a compilation of the laws that each state has in place to protect health care consumers.

Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans. 1201 New York Avenue NW, Suite 1100 · Washington, DC 20005 202-628-3030 · or mailto:info@familiesusa.org · http://www.familiesusa.org

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