Illinois: Dems OFFICIALLY override Gov. Rauner's veto restricting #ShortAssPlans...and nip rescission in the bud as well!

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

A couple of weeks ago I noted that the Illinois state Senate unanimously overrode outgoing Governor Rauner's veto of their bill restricting the sale of non-ACA compliant short-term, limited duration healthcare plans.

Today, I'm happy to report that the state House has followed up and overrode the veto as well:

Breaking: Just got word that the Illinois legislature has overridden the veto on SB1737 which limits short term plans to 6 months and bans rescissions of short term plans. @GtownCHIR h/t @stephanibecker

— Dania Palanker (@DaniaPal) November 27, 2018

While I would have preferred that the bill restrict STLDs to just 3 months (which was the limit nationally under the Obama Administration) or, better yet, just ban them entirely as both California and New Jersey have done, this is still a lot better than allowing them to go completely unchecked, and I believe the bill also prevents them from being renewable within the same year (it would kind of defeat the point of the 6-month limit otherwise). That's why they're called "Short Term, Limited Duration" plans in the first place, after all.

The part about banning rescissions is a nice bonus which makes this bill even better.

As a reminder:

Rescission:

The retroactive cancellation of a health insurance policy. Insurance companies will sometimes retroactively cancel your entire policy if you made a mistake on your initial application when you buy an individual market insurance policy. Under the Affordable Care Act, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.

Rescission was a particularly nasty problem on the individual market before the ACA. Here's basically how it worked:

  • To apply for coverage, you filled out a mountain of paperwork detailing your entire medical history for decades...every operation, every doctor visit, every prescription, every referral, every cut and scratch.
  • Assuming your application was actually accepted by the carrier, you might be enrolled for months or even years, paying your premiums each and every month as you're supposed to, perhaps never actually using your policy for more than a check-up or flu shot. The insurance carrier would thus make money off of you.
  • Then, one day, you get diagnosed with cancer, diabetes or some other expensive ailment, and you put in a claim to cover your medical expenses...that is, you finally actually use the coverage you've been paying for all this time.
  • The carrier would then say "hold the phone, Sparky!"...and would pore over every line of that mountain of paperwork you filled out years earlier.
  • Then, if they found even a single uncrossed "t" or undotted "i"...perhaps you forgot about the time you went to a dermatologist to see about a benign rash 10 years ago or whatever...BLAM. They'd use that as an excuse to retroactively cancel your entire policy.
  • Thus, you've now lost out on thousands of dollars in premiums when you didn't need any healthcare services...and the moment you actually do need your coverage, you don't have any.

There was a lot of talk about rescission during the 2008-2009 healthcare debate, but you haven't heard about it much since then...mainly because it was outlawed by the ACA...for the most part:

To end this practice, the Patient Protection and Affordable Care Act ("PPACA") included language to ensure that individuals would no longer unjustly lose health coverage by rescission. Effective for the first plan year beginning on or after September 23, 2010, a group health plan or health insurance issuer cannot rescind coverage with respect to an individual once the individual is covered under a plan or policy unless the individual performs an act, practice, or omission that constitutes fraud or an intentional misrepresentation of material fact, as prohibited by the terms of the plan or coverage. A group health plan or health insurance issuer must provide at least 30 days advance written notice to each participant who would be affected before coverage can be rescinded, regardless of whether the coverage is self-funded or fully-insured. These regulations apply to both grandfathered and non-grandfathered health plans.

The rescission ban apparently didn't apply to short-term plans and certain other types of non-ACA policies, which are therefore free to keep doing this depending on the state; it's one of the many, many ugly little surprises waiting in the fine print. It sounds like the new Illinois law will nip that in the bud for STLDs as well, which is a Good Thing.

Oh, and while we're on the subject...

Looking at rescissions is a first step in understanding how short-term plans post claims underwrite in order to protect consumers from having the final protection they believe they have from being pulled away. Second step is post claims underwriting to deny claims.

— Dania Palanker (@DaniaPal) November 29, 2018

What's "post-claims underwriting"? Exactly what it sounds like:

There's also what the industry euphemistically calls, "underwriting at the time of claim" (actual quote from issuer). Ask a few basic questions, make it easy to buy / enroll in the short term plan, then find a reason to deny/ rescind once big claim comes in.

— George Kalogeropoulos (@GeorgeK_HS) November 29, 2018