In his Congressional testimony, the CEO of a health insurance company said:
Rescission is rare. It affects less than one-half of one percent of people we cover.
As you probably already have learned, rescission is the insurance company practice of refusing to pay for health care because they found an (even unrelated) mistake on your original health insurance application.
But in claiming that this practice is rare, the insurance companies, whose very business depends on understanding statistics and probability, are betting that you don’t understand probability enough to catch the lie. Indeed, “Figures never lie, but liars always figure.”
For starters, even if you take the insurance company’s statement at face value — that it only affects one-half of one percent — this is a huge number of people. The population of the US is greater than 300 million people. Even if you assume that insurance companies only insure two-thirds of all Americans, one-half of one percent of that is over one million people. They are depending on the fact that “one-half of one percent” sounds small.
But the much bigger lie is carefully documented in a brilliant article in Taunter Media, which points out that calling rescission rare is, shall we say, misleading at best. Yes, the insurance company may only cancel the policies of one-half of one percent of the total people they cover, but the more significant statistic would be what percentage of the people who have very expensive medical care claims do the insurance companies cancel? After all, the insurance companies only try to use rescission on people who have expensive claims. The insurance companies do not provide this data, of course, but based on other hard data, Taunter calculates it to be somewhat higher than fifty percent.
Let me clarify that. If you are one of the lucky people who has adequate health insurance, but you are unlucky enough to contract a disease or have an accident that is very expensive to treat, you have a greater than 50% chance that the insurance company will find some reason to cancel your policy, and not pay for your treatment (likely forcing you into bankruptcy at the same time that you are trying to deal with a serious health problem). And of course, the health insurance company will keep all the money you paid to them in premiums.
One more time. If you ever really need your health insurance policy, you have less than even odds that the insurance company will actually pay for your health care.
Would you put up with a bank that confiscated your life savings when you tried to withdraw it, because of a trivial mistake you made on your original application form? The insurance companies have even cancelled policies for omissions on application forms that the applicant had absolutely no knowledge of.
No wonder we have so many people in the US who don’t have health insurance. It is a ripoff. No wonder the health insurance industry is spending millions of dollars in misleading ads and campaign contributions to defeat a public option. Who wouldn’t choose a public option over such a ripoff?