The Connecticut General Assembly recently enacted legislation (Public Act 07-113), signed into law by Governor M. Jodi Rell on June 12, to prohibit health insurers or HMOs (termed “health care centers” under Connecticut law) from engaging in the practice of “post-claim underwriting.” “Post-claim underwriting” occurs when an insurer issues a policy to an applicant without thoroughly reviewing an applicant’s medical records and only upon the submission of a claim, does the insurer examine the applicant’s medical records in detail and discover a medical condition that would have disqualified the applicant from coverage in the first place. The insurer then attempts to rescind the policy, leaving the applicant uninsured.
As a result of this proposed legislation, Connecticut now requires insurers to obtain approval from the Insurance Commissioner before it can rescind policies. The new law prohibits rescission if the grounds for rescission are based on “the insurer’s failure to complete medical underwriting” and failure to “resolve all reasonable medical questions arising from written information submitted on (or omitted from) an application,” unless the insurer proves to the Insurance Commissioner that (1) the information was false and provided by the applicant with knowledge of its falsity; or (2) the information was knowingly omitted. In addition, the insurer must prove that the information or omission materially affected the risk it assumed.
For the full text of the legislation, click here.