What happens if you didn't tell the Insurance Company about a condition or disease that you knew or should have KNOWN about? That is, what if there is wrong on incomplete information on the application?
Best of Knowlege
In our opinion and see the law, rules and cases below along with recent news articles, - the company can cancel the policy, give back the premium - force the agent/broker to give back the commission or service fees, even if the condition has NOTHING to do with the claim that arises. This in fact happened to us back in the early 80's, the start of the AIDS epidemic. We had someone who was in a bar fight in Haiti, got stabbed and was given multiple blood transfusions. His policy was cancelled in this letter via certified mail, when he turned in a claim for some kind of stomach hospitalization. I asked why he didn't mention it, he said that he knew he wouldn't get a policy if he did. This is the ONLY time it's ever happened in our office!! There are NOW policies that can be written, no matter WHAT medical conditions you have.
Below are sections of the appropriate passages in policies and applications, legal definitions, case law, etc.**
NEW - California Passes AB 2569 (2008) An act to add Sections 1389.7 and 1389.8 to the Health and Safety Code, and to add Sections 10119.2 and 10119.3 to the Insurance Code, relating to health care coverage. which limits the rights of Insurance Companies to cancel..., those clients who had coverage improperly cancelled have the right to get their policy back and after 1/1/2009 the agent must sign a special attestation form.
The REAL issue is - What did the application for your coverage say? Here's the relevant information from the Blue Cross Individual Application.
6A. Health History Questionnaire – ALL QUESTIONS MUST BE ANSWERED OR THE APPLICATION WILL BE RETURNED. Give COMPLETE details of any "Yes" answers in Section 6C on the following page.
Has any person listed on this application, in the last 10 years, had any signs or symptoms, seen a health care provider, had treatment recommended including prescription medications, received treatment, or been hospitalized for any of the following conditions as stated in questions 1 through 14?
How does the Insurance Company know, if the application wasn't filled out correctly? Here's where they write to your MD, before a claim is even turned in.
The CA Insurance Commissioner now posts typical Underwriting Guidelines Under AB 356 10113.95
Blue Cross settlement proposal to only cancel if the error was intentional 5/11/2007 LA Times 2/23/2008 $9 million award more Calif Health Line Anderson Cooper Newscast$15 Million Settlement on CA DOI Website
Rescission of Membership Recession in CA - IRMI.com
I have provided a complete history of material information that will be considered in the acceptance or denial of this application. I understand that if I intentionally provided incomplete or false material information Blue Cross may revoke my coverage. This means Blue Cross will cancel membership as if it never existed. Also, after approval for membership, if material information is discovered by Blue Cross that was not provided to the Plan prior to the effective date of the policy, Blue Cross may deny coverage.
I understand and agree that I alone am responsible for the accuracy and completeness of this application.
I have personally read and completed this application. If I am accepted, this application will become part of the contract between Blue Cross and me. Blue Cross Individual Application
Extensive Article on Post Claim Underwriting The Federation.org
Retroactive Action
Blue Cross has 24 months to initiate retroactive action due to false or omitted health history information on the application. Claims submitted during that period are audited to ensure that preexisting conditions not listed on the application were not diagnosed, evaluated, or treated prior to enrollment. If a preexisting condition that should have been disclosed is discovered, the contract may be retroactively canceled, or it may be re-underwritten and placed into coverage that would have been offered based upon complete original information.Source - Blue Cross Confidential Agent's Manual
Employers and employees who commit fraud or misrepresentation to circumvent the law or rules governing PacAdvantage will be disqualified, possibly retroactive to the initial enrollment date. In cases of fraud, individuals may be financially responsible for their own medical care, even care provided while improperly enrolled through PacAdvantage. Page 6 Pac Advantage Employer Manual 7/04
AB 1945 - California Proposed Law to Prohibit Post Claims Underwriting
More up to date info http://www.leginfo.ca.gov/bilinfo.html then key in AB 1945
What disclosure is required, under the California Insurance Code?
WHAT IF THE INSURED LIED ABOUT A HEART ATTACK - free advise.com ?
See also - What is a Pre-Existing Condition?
Web MD
What if the insurer goes to far - Bad Faith? Free Advise.com
What is a Material Fact - Definition LectLaw
CA Insurance Code on
Disclosure
The US Military has similar rules
On the other hand - lawsuits pending to limit insurer ability to cancel
"to the best of my knowledge"
Definition: 1. information in mind: general awareness or possession of information, facts, ideas, truths, or principles -- Her knowledge and interests are extensive. 2. specific information: clear awareness or explicit information, e.g. of a situation or fact ---I believe they have knowledge of the circumstances. Encarta
To render life policy void for falsity of warranty that answers in application therefor are true to best of applicant's knowledge and belief, they must be substantially untrue, not merely in fact, but to best of applicant's knowledge and belief. St.1917, p. 964, 6 (West's Ann. Insurance Code, 10380); West's Ann.Civ.Code, ? 1572.
Combs v. Burbank Mut. Life & Benefit Ass'n 140 Cal.App. 139, 35 P.2d 132 (Cal.App. 2 Dist. 1934)
Applicant's failure to disclose diagnosis of leukemia and thereby correct misstatements in application for life insurance policy breached continuing duty of good faith and provided basis for rescission under statute requiring each party to contract of insurance to communicate to the other, in good faith, all facts within knowledge which are or are believed to be material to contract, as to which no warranty is made, and which cannot be ascertained by other party, even if insurer could have discovered disease by complete blood count (CBC) during application process. CA Ins.Code 332.
Lunardi v. Great-West Life Assurance Co. 37 Cal.App.4th 807, 44 Cal.Rptr.2d 56 (Cal.App. 6 Dist.,1995)
Existing law prohibits a plan or insurer from rescinding, canceling, or limiting a health plan contract or health insurance policy due to the plan's or insurer's failure to complete medical underwriting and resolve all reasonable questions arising from written information on or with an application before issuing a contract or policy
Legislative diagest of AB 2569
medical news today.com
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