Stopping Insurance Company Abuses In New Jersey

September 20, 2010 9:14 pm ET

Insurance companies have profited from the illnesses and ailments of consumers for many years. One of the major facets of the new health care law will prevent insurance companies from preying on unsuspecting Americans. The law will make it illegal for insurance companies to drop coverage of policyholders for trivial reasons and will allow for an improved appeals process if an insurance company refuses to cover or pay for services. Here are some details on this major aspect of the law that will be implemented starting September 23, 2010.

What Is Rescission And How Does The New Health Care Law Combat It?

Insurance companies have long engaged in rescission, or taking away a person's insurance coverage, most often when that person has been diagnosed with a condition or disease that is very expensive to cover. After diagnosis, the insurance companies then look into the person's health history and find a minor condition (i.e. high blood pressure) — generally, one that the person was unaware of — and use the condition as the basis for terminating coverage.

Under the new law, this practice is illegal. 

Starting September 23, 2010, Insurance Companies Can No Longer Rescind Coverage. According to the State of New Jersey Department of Banking and Insurance: "Any provision of the [Policy] that describes the right of [the insurer] to rescind or void the [Policy] or to rescind the coverage of an individual under the [Policy] is amended to permit [the insurer] to rescind or void the entire [Policy] or the coverage of an individual only if (1) the individual (or a person seeking coverage on behalf of the individual) performs an act, practice, or omission that constitutes fraud; or (2) the individual (or a person seeking coverage on behalf of the individual) makes an intentional misrepresentation of material fact. " [State of New Jersey Department of Banking and Insurance, 8/27/10]

Without Reform, Insurance Companies Would Have Continued To Rescind Policies For ANY Reason. NPR reported that in a hearing conducted by a subcommittee of the House Energy and Commerce Committee: "Rep. Bart Stupak (D-MI), who chaired the hearing, asked all three CEOs [of the insurance companies] if they would agree to stop rescinding policies except in cases of fraud. All three said no."  [NPR.org, 6/22/09]

Appealing Insurance Company Decisions

Due to intentionally complicated forms, appealing a health insurance company's decisions can be extremely difficult for the average policyholder. Additionally, most decisions are reviewed internally, which makes it easier for a biased reviewer working for the insurance company to deny your claim. Under the new law, companies are required to have independent and non-biased reviewers to ensure that policyholders' appeal rights are not violated.

The Affordable Care Act Requires Insurance Companies to Implement An Approved Appeals Process. According to the State of New Jersey Department of Banking and Insurance: "[W]ith respect to appeals, group plans must incorporate the Department of Labor's claims and appeals procedures and update them to reflect standards established by the Secretary of Labor. Individual plans must incorporate applicable law requirements and update them to reflect standards established by the Secretary of HHS. All plans must comply with applicable state external review processes that, at a minimum, include consumer protections in the NAIC Uniform External Review Model Act or minimum standards established by the Secretary of HHS." [State of New Jersey Department of Banking and Insurance, accessed 9/9/10]

Insurance Companies Must Include Certain Minimum Requirements. According to Commerce Clearing House, insurance companies must implement an appeals process that, at minimum, includes the following:

  • An established internal claims appeal process;
  • A notice to participants, in a "culturally and linguistically appropriate manner," of available internal and external appeals processes, including the availability of assistance with the appeals processes; and
  • A provision allowing an enrollee to review his or her file, to present evidence and testimony as part of the appeals process, and to receive continued coverage during the appeals process.

[Commerce Clearing House, 6/8/10]

New Jerseyans Will Have the Right To Appeal To An Improved External Review Board. Consumers will have their rights expanded and will be able to have an independent, external review board review their claims. According to the Kaiser Family Foundation, "[t]he rate at which external reviewers overturn health plan denials... averaged 45 percent across all states." [Kaiser Family Foundation, 5/02]

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