The lawyers have been at it again...

As has been covered in several previous posts, Blue Cross of California is in the middle of a class action lawsuit over rescission of coverage. When used appropriately and with discretion, the ability to rescind coverage is important to protect the carrier against fraud. It's also a disaster for the consumer if it's inappropriately applied.

We've just received the new version of the small group application forms and there have been dramatic changes that address this issue. I thought you would be interested to see the differences between the old and new forms.

Here is the wording in previous version of the employer app:

Coverage may be rescinded if there are misstatements in this application.

Simple. No? And now for the new version:

Rescission

We have provided a complete history of material information that is considered in the acceptance or denial of the enrollment application. Following approval of coverage, if Blue Cross discovers that we intentionally provided incomplete or false material information or withheld material information from Blue Cross prior to the Effective Date of the Agreement, Blue Cross may revoke coverage. This means Blue Cross may cancel coverage as if it never existed.
If Blue Cross revokes our Group coverage under the Combined Evidence of Coverage and Disclosure Form, Blue Cross will send a written notice explaining the basis for the decision and our appeal rights. We have the option to submit a new application in the future to be underwritten and considered for enrollment. We will be required to pay for any services that were covered for an employee, and Blue Cross will refund any amounts paid by our Group except amounts already paid by Blue Cross on behalf of our employees.
We have personally read and attest to the completeness and validity of the information provided on this application for coverage. If we are accepted, this application will become part of the contract between Blue Cross and our Group. We and any enrolled family members agree to abide by the terms of that contract. Initials: (emphasis added)

That's potentially a bankruptcy-level penalty for a small business.

And on the employee's side, the old app read:

Even if this application is approved, any misstatements or omissions may result in future claims being denied and the policy being rescinded.

The new employee application reads:

Rescission

I have provided a complete history of material information that is considered in the acceptance or denial of this enrollment application. I understand and agree that I alone am responsible for the accuracy and completeness of this application, and to the best of my knowledge and belief, I have done everything necessary to be able to assure you that all information about any children under the age of 18 listed on this application is true and complete. Also, all of my dependents listed on this application that are over the age of 18 years have read this application and have provided complete and accurate Information for this application. I understand and agree that following approval of the enrollment application, if Blue Cross discovers that I intentionally provided incomplete or false material information or withheld material information from Blue Cross prior to the Effective Date of the Agreement, Blue Cross may revoke coverage. This means Blue Cross may cancel coverage as if it never existed.
If Blue Cross revokes your coverage under the Combined Evidence of Coverage and Disclosure Form, Blue Cross will send you a written notice explaining the basis for the decision and your appeal rights. You have the option to submit a new application in the future to be underwritten and considered for enrollment. You will be required to pay for any services that were covered while you were a Member, and Blue Cross will refund any amounts paid by you except amounts already paid by Blue Cross.
I have personally read and attest to the completeness and validity of the information provided on this application for coverage. If I am accepted, this application will become part of the contract between Blue Cross and I. I and any enrolled family members agree to abide by the terms of the contract. Initials:

Notice that the old version of the employee application has ambiguity in the difference between "future claims" and the concept of rescission back to day one. The new version clears that up and basically says that you're toast if the coverage is rescinded. It also specifically adds in the words "intentionally" and "materially" so trivial and accidental omissions don't provide a basis for rescission...regardless of the size of the claim that triggered the review.

The new forms are a huge improvement in openness and clarity. Rescission is a very serious matter and it's important that it be fully explained.