Insurance ‘rescission’ source of controversy

The insurance industry is coming under increasing criticism for its practice of retroactively cancelling individual health policies. Some states even have passed new regulations or pursued regulatory action to restrict the practice (Source: “Retroactive cancellations bring health insurers heat,” Cincinnati Enquirer, June 28, 2008).

Insurance companies defend the practice of “rescission” as a necessary tool to combat consumer fraud in instances when consumers fail to disclose pre-existing conditions or misrepresent important facts about their medical histories. Some consumers and lawyers, however, contend that the cancellations are a means for insurance companies to avoid paying benefits to patients with chronic or life-threatening diseases.