Intensive Care for Health Care Service Plans: Addressing the Growing Problem of Post-Claims Underwriting and Rescissions by Plan Providers

Kenneth R. Shurtz

Abstract

In recent years, thousands of patients have been left without health care coverage – their plans rescinded or canceled after health care providers investigated the patients’ prior medical histories. These rescission investigations are often conducted after the patient has become ill or injured, receives treatment and files a claim. This practice, commonly known as post-claims underwriting, leaves vulnerable patients without coverage at a time when coverage is needed most. Although states have increasingly enacted statutes that specifically prohibit post-claims underwriting, state enforcement agencies have varied widely in their interpretation and enforcement of such statutes. Through a case study of a recent California case, Hailey v. California Physicians Service, this Article examines the practice of post-claims underwriting, the effect of statutes prohibiting the practice, the role of courts in interpreting these laws, and the impact of recent case law. The Hailey case not only represents a turning point in the application of these statutes to the health care industry, but it helps to demonstrate the real world dilemmas that led to the passage of statutes prohibiting post-claims underwriting. Given the current trend in prohibiting the practice, the impact of the Hailey decision on California Health and Safety Code section 1389.3 will likely have similar effects in other states and echo throughout the U.S. health care industry.