Health Insurance Articles

What Is Rescission

2010-01-15

Simply put, rescission is the termination of a contract. In the health care industry, rescission has commonly become known as the process of health insurance companies unexpectedly canceling a health insurance policy. The health insurance coverage of high-risk policyholder is sometimes canceled after they are diagnosed with an expensive illness, or when the extensive medical treatment needed by a policyholder becomes too costly for the health insurance company.

Many people consider the rescission of a health insurance policy based on patient illness to be a controversial and unfair move by insurance companies. The ability for insurance companies to do so makes policyholders fear that they can be removed from their health insurance policy with little or no warning. Policyholders fear that after years of paying medical premiums, their insurance companies can arbitrarily cancel their policy if they become ill with a life-threatening condition, leaving them no means to pay for medical treatment. Health insurance companies, however, argue that the insured sometimes withhold information about their preexisting medical condition to secure a health insurance policy.

Rescission, or cancellation of health insurance contracts, has been extensively examined in the United States during the health care reform that is still taking place on Capitol Hill. The policy enacted by President Barack Obama limits the ability of insurance companies to deny health insurance coverage based on a patients diagnosis. This reform limits the risk of individuals being canceled from their insurance policies. However, many are concerned that this will continue to drive up health care costs in the United States.

Rescission of insurance policies takes place because insurance is a business. Costly or expensive clients drive up the cost of doing business, and, in an effort to prevent extreme financial losses, insurance companies seek out ways to reduce costs. Consumers, on the other hand, fear terminal illness and feel that they deserve quality medical care regardless of their diagnosis, and without fear of cancellation, or rescission, of the policy. Regardless of the position taken on health care reform, it is undeniable that the cost of health care in the United States is at an all time high. Americans currently spend more money on health insurance, per person, than any other nation. In fact, Americans spend more of their earned income on health insurance costs and medical bills than the citizens of other countries. Despite the large amount of money spent on health care by Americans, 15 percent of the population currently remains uninsured.

Regardless of the cost of health insurance now or in the future, rescission remains a real threat to health insurance policyholders. With new reform, it's possible that threat will be minimized in the near future.