There was an episode of The Good Wife a few weeks ago that tackled this issue. A wife wanted surgery on her fetus to correct a heart defect and the insurance company fought it tooth and nail, ultimately using data mining to discover a picture posted online of her husband smoking a cigarette on a drunken camping trip with his buddies.
They connected that to a "no" answer on the smoking question on the application (it asked if he had smoked in the "previous six months") and used it as the pretext to cancel his policy. And the judge upheld it, because the guy *did* lie, whether deliberately or because he just didn't recall.
I bet a lot of people lie on this question, incidentally.
I think they call this practice "recission," and I can't see how you ban it. It's an anti-fraud measure. I don't know, but I doubt the Lyme's Disease hypothetical described above would pass muster, since the insured didn't know
s/he had Lyme's at the tme she signed up. You can't be held accountable for failing to disclose something you don't know about -- at least, I hope not.
There's no question that a) this law does a lot of good things (such as forbidding denial of coverage over preexisting conditions -- so don't commit fraud on your application!) *and* b) that insurance companies, being what they are, will try, and probably succeed, in finding ways to continue being d-bags. Same as it ever was.
But in this case, I don't see how you tell insurance companies, "you can't drop people even if you can demonstrate they lied on their applications."
BTW, in the episode, the young couple lost the case but ended up getting them to cover the surgery when the good guys' firm threatened to exposure the insurance company's sleazy, secret data mining operation which, IIRC, automatically investigated anyone diagnosed with serious conditions to see if there was a pretext to drop them. Now, *that* sort of thing -- which absolutely happens in real life... there was a recent story about an insurer who did this for everyone on its rolls diagnosed with HIV -- I could see regulating. It should be possible to achieve an ethical balance between preserving an insurer's right to do due diligence and forbidding them to cull their rolls with an eye on the bottom line and no thought of the well-being of the people whose healthcare they are responsible for providing.
Edited by BklnScott, 30 March 2010 - 09:21 AM.