When Your Insurer Says You're No Longer Covered

Sally Marrari, who co-owns R& S Auto in Los Angeles, is trading service on her doctor's Porsche for medical care. (By Carlos Puma For The Washington Post)

"These cases are very, very good in front of a jury," said Bill Shernoff, whose Claremont law firm has settled 90 cases and has 130 cases pending. "I wish I could tell you the amount of money they throw at us just to make it go away and keep quiet."

In the only case to go to trial in California, an arbitration judge awarded $9 million to a beautician who had to stop chemotherapy for her breast cancer after Health Net dropped her policy. Company officials declined to comment.

In a pending case, Blue Shield searched in vain for an inconsistency in the health records of the wife of a dairy farmer after she filed a claim for emergency gallbladder surgery, according to attorneys for the family. Turning to her husband's questionnaire, the company discovered he had not mentioned his high cholesterol and dropped them both. Blue Shield officials said they would not comment on a pending case.

Officials from three insurance companies told a House Energy and Commerce subcommittee this summer they had saved $300 million by canceling about 20,000 policies over five years.

Critics charge that companies, rather than vetting applicants, wait until a claim is filed. "It only happens if you create this bill. Then they go back into your application," said Dev GnanaDev, president of the California Medical Association, which lobbied Democratic House leaders to include restrictions on cancellations in their legislation. "Costco doesn't let me take something back after 90 days," he said. "If they want to investigate, let them do it within 90 days."

Regulators say many omissions appear to be honest mistakes on forms that are needlessly complex. Others result from ambiguous conversations between patient and doctor.

Yvette Thomassian of Glendale, Calif., lost her Blue Cross policy because she did not declare a deviated septum. She questioned why a common misalignment of the nostrils would disqualify anyone but emphasized that her doctor never clearly indicated she had the condition. They spoke Armenian in the exam room, she said, where the physician's words were "You have a bone in your nose."

"It's been three years of hell," said Thomassian, whose suit over the $31,000 in bills is scheduled for trial in January. Blue Cross officials said they would not discuss specific cases.

For Teresa Dietrich, it was fibroids. The Northern California real estate agent was left to pay $19,000 after Blue Cross said she did not disclose a diagnosis of the benign uterine tumors. But Dietrich said the doctor who had written "fibroids" on her medical record never mentioned his suspicions to her. The bills destroyed her credit and cost her her home -- and, in a comically cruel twist, the surgery proved the doctor was wrong.

"They said I had a condition I didn't even have," Dietrich said. "And they canceled me."

If federal health-care reform bars companies from screening for preexisting conditions, insurers note that cancellations will no longer be an issue. But Melinda Beeuwkes Buntin, an economist at the Rand Corp., said that unless for-profit companies are compensated for taking higher-risk patients, the firms will continue to look for ways to unload them.

"They wouldn't be able to overtly kick you out, but that doesn't mean that they might not put, for example, more onerous preauthorization requirements on services that people who are at risk might need, and that might discourage you from re-enrolling next year," Buntin said.

She said one solution would be for Washington to subsidize insurers that take on higher-risk patients. The government does such "risk adjustment" for the private insurance provided through Medicare Advantage -- though Obama has called for ending those subsidies to finance reform.

"You can ban rescission," Buntin said, "but what we really want is a system under which insurers' incentives are aligned with treating all of their patients well, whether they're sick or healthy."