UnitedHealth to stop dropping policies of sick

WASHINGTON Wed Apr 28, 2010 2:01pm EDT

Beds lie empty in the emergency room of Tulane University Hospital in New Orleans February 14, 2006. REUTERS/Lee Celano

Beds lie empty in the emergency room of Tulane University Hospital in New Orleans February 14, 2006.

Credit: Reuters/Lee Celano

WASHINGTON (Reuters) - UnitedHealth Group Inc said on Wednesday it would immediately stop terminating healthcare coverage for policyholders after they become ill, to comply with a new healthcare law months ahead of schedule.

The law, passed in March, gives health insurers until September 23 to stop several practices, including ending coverage for patients after they get sick, a practice called rescission. It also prohibits insurers from refusing to cover people with pre-existing conditions and capping lifetime payouts.

"In the spirit of the recently passed health reform legislation, UnitedHealthcare moved quickly to eliminate the practice of rescission, except in cases of fraud or intentional misrepresentation of material fact," UnitedHealthcare President Gail Boudreaux said in a statement.

Other insurers, such as Aetna Inc and Assurant Inc unit Assurant Health, have said they would end rescission ahead of the deadline but they did not say when.

On Tuesday, WellPoint Inc said it would end rescission on May 1.

The decisions come after pressure from Democrats and the Obama administration to immediately stop rescission. Democrats pushed for action sooner after an April 22 Reuters report said WellPoint used computer algorithms to target women with breast cancer for an investigation, with the intent of canceling their healthcare policies.

WellPoint has called the story inaccurate. Reuters has stood by the report.

The new law bans rescission except in cases of fraud or misrepresentation.

The Reuters story triggered a rebuke from U.S. Health Secretary Kathleen Sebelius, who last week urged WellPoint and others to step up compliance. After WellPoint's decision, Sebelius said other companies should "not wait until September to do the right thing."

A number of insurers have implemented a reform extending healthcare coverage to young people until age 26 under a parent's policy.

Democrats, in letters to seven insurers on Tuesday, said the companies should implement the rescission ban immediately and institute independent, third-party reviews of any decisions to drop coverage.

UnitedHealth "is aggressively seeking outside vendors and will be instituting independent, external third party review in the near term," the company said.

Aetna and Assurant Health have said they have third-party review systems in place.

(Reporting by Susan Heavey; additional reporting by Lewis Krauskopf in New York; editing by Maureen Bavdek and Robert MacMillan)