Critics point to insurance companies refusal to cover pre-existing conditions as a problem, but I am fine with the insurance company refusing to insure pre-existing conditions. However, I am opposed to denying legitimate claims in order to cut costs. The denial of claims or cancellation of insurance after a claim is made is referred to as rescission. Rescissions are not necessarily evil because they does have a proper role in combating fraud. If an applicant lies about a pre-existing condition and then makes a claim resulting from that pre-existing condition, then a denial of claim and rescission is proper. Combating fraud helps to hold down the cost of honest customers and the right to rescind a policy is cheaper than requiring a verifiable, complete medical history from each applicant. However, denying a claim due to an honest mistake by the customer should be forbidden. So, how can you tell the difference between an honest mistake and a fraudulent application? First, a rescission can only occur when the claim is related to the error in the paperwork. If you forgot to mention a broken leg when you were a child and make a claim for a heart attack, the insurance company must honor the claim. Second, the rescission must occur within a reasonable amount of time -- I'd choose two years. Even if you have a family history of heart disease that you covered up, if you don't make a claim or if they don't catch you for two years, then you are free and clear. The third issue is intent and this is the hardest to determine. Did the applicant make an honest mistake or was he trying to cover something up? You have a heart attack after 6 months and the insurance company finds out that your estranged father was on medication for high blood pressure. That would be one for the courts or arbitration panel to decide.
An associated reform covers changes in premiums. Even if insurance is not rescinded, premiums could still rise after a customer has a serious illness. The term of an insurance contract and the allowable increases in premiums must be laid out in the initial contract. If you want a ten-year contract with premium increases restricted to 5% per year, then you could get it. A year-to-year contract would also be available with the knowledge that the customer is taking on the risk of premium increases.
The final major reform is the allowance of interstate competition and the removal of federal antitrust exemptions. Insurance companies are currently protected from federal antitrust laws under the 1945 McCarran-Ferguson Act. The supposed reasoning for this exemption is that they are regulated under separate state regulations with a prohibition against interstate competition. This results in individual state markets that are dominated by a single insurance company. Rates among states vary widely largely based on regulations that restrict risk-based premiums or require mandates that customers may not want. A twenty-five year old who doesn't want coverage for mental health care would be charged the same as a sixty-year old who wants his Viagra covered under a state mandate. Moves to repeal the antitrust exemption and to allow interstate competition are already underway and will hopefully pass regardless of the final health care reform.