State Rescission

From an email, sent to all employees, from the Office of the Governor of the Commonwealth of Virginia:

Virginia faces its most critical budget shortfall in several decades and we must do all that we can to reduce spending pressures…

If you are enrolled in the state health plan and have "You Plus One" or "You Plus Two or More" coverage, you will receive a packet of information concerning the audit of eligible dependents. I strongly urge you to provide the necessary information to protect your continued coverage by the state health plan.

You will be asked to sign an affidavit attesting that each of your dependents is eligible to be covered by the state health plan (click here for definitions of eligible dependents).

Participation is required. The health benefits program may initiate spot audits that will require additional documentation of dependent eligibility. The benefit to you and other state employees is that this audit will help keep health care costs down by removing ineligible persons from the state health plan.

Comments

That is not recission. That is fraud detection, or if you want to be charitable an "eligibility reminder" aimed at those whose children have aged out of dependent coverage. My company sent a very similar e-mail last month. This is a plainly appropriate budgeting action (applying the clear terms of the contract) taken involving healthy people. The recission you hear reform advocates complaining about involves waiting until someone gets an expensive disease and then dropping them individually, not as a class. Conflating the two is misleading.

The motivations are not the same. The email was send to all employees - not the sick ones, or the ones with sick dependants. That's because, I surmise, the state of Virginia pays money for each person on healthcare, whereas an insurance company earns money from each person until they get sick. And I don't see how it's "post-claims underwriting" to run checks on people who haven't yet made claims.

"The motivations are not the same."

That's right. Think crimes will no longer be tolerated!

"Doesn't it strike anyone as funny that there is a strong push by the federal government to insure everyone while state governments are trying to push people off their rolls?"

Funny in that it's exactly what you would expect? Why foot the bill if Obama will do it for you? It's worked so far with infrastructure (well, worked for some...).

Oops, you're right CJS.

Thank you for responding.

I agree that just dropping someone simply because they got sick is illegal. The concern is when companies do it on a very thin basis. For instance, in the document you cited, it mentions a woman whose insurance was rescinded for failing to disclose having visited the doctor for having heavy periods, which she was told by her doctor was "normal". Another example was an "undiagnosed preexisting condition." This may be legal, if the terms of the contract call for such extensive reporting, but is much less understandable from a public policy perspective than sending out a reminder about dependent eligibility. While the economic motivation may be the same, these are not the same thing in terms of impact on the individual. If you are dropped from your parents' plan because you turn 25, you have the option of getting your own insurance (also being dropped at a certain age is predictable). If you get dropped after getting sick, you're in a much different place.

"Rescission" has recently become a tainted term, but it does apply to what VA is doing. It is however completely different morally. It isn't the denial of insurance to ineligible people that's the problem, as such - it's taking premiums from them and then checking if they're eligible after they get sick. VA isn't doing that, but the insurers who have been criticised for "rescission" have. It's similar to the common casino practice of letting under-age people play only as long as they fail to win.

I'm sorry. What Virginia is doing is not "rescission". "Rescission" means the unmaking of a contract. It is an annulment of contract.

Virginia is simply policing benefit claims, to ensure that contract terms are met. The contract and its terms, remain unimpaired. So, no rescission is involved.

Rescission means canceling the insurance contract. In general, it is a practice that only makes sense in the individual insurance market. Virginia's employees don't have individual insurance contracts; Virginia is contracting with insurance companies to provide group coverage in some form. If there is an insurance contract, it is between Virginia-as-an-employer and a health insurer.

Many employers self-insure. They hire an insurance company to administer the group plan, but pay only a service fee and actual expenses. Sometimes, when a particular covered employee has an injury or illness that foretells a very large continuing expense, the employer will simply alter the terms of promised coverage to limit the expense for that particular covered condition. The covered employee is to told that, say, begining on November 1, a $5000 limit now applies to expenses related to his condition; sorry. This is not rescission, either, because the employee does not have a contract with anyone. The insurance contract is between the employer and the health insurer or health benefits administrator. Their contract continues, and the terms are altered by mutual consent. The employee, typically, does not have an employment contract. I don't know if that practice has a clever name, but it is perfectly legal.

I might be a little late to this party but this sort of request happens in the private sector all the time. I have been married for almost 20 years and have 2 small children and I received an order to prove that I was married. I sent in the first page of my tax return but that was not deemed sufficient (this was in San Francisco which allows partner benefits anyway) and I had to produce my marriage certificate which was mildly difficult since we were married in Connecticut. A lot of hassle for nothing.

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