States Fail to Protect Consumers Against Insurance Company Abuse

A recent 50-state survey 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, a national organization for health care consumers. The 50-state survey of insurance commissioners 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% 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.”

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.”

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