I was discussing the potential benefits of quitting smoking with a friend and commented that we’d save on our health insurance premiums. She laughed at the idea that I had truthfully admitted the habit on the insurance application. How would they know, and what could they do about it anyway?
My reaction was that if a person lied on the appication, and the lie was discovered later, the insurance company could declare the whole policy void because of the deception and that all holy financial hell could rain down. As if, you’d have to pay back all the benefits paid over the years and/or back pay at the smoker’s rate for all of the previous years of the policy.
It’s obvious to me that something like this is a factor, otherwise nobody would ever fill out the forms truthfully. Am I right? Would this hold true for other facts alleged on an insurance application? Alcohol consumption, or medical history? Your sky-diving hobby?
Or, suppose you were truthful on the initial application and then later took up some dangerous practice or other but didn’t tell the insurance company about it?
They would void your health insurance and all the money you paid in would be lost. Thing is, even if they knew today they will happily let you continue paying them for years. They’ll bring it up if you try to submit a bill.
It’d then be up to you to pay all your own health care costs.
Insurance companies have been doing such things for a long time to avoid paying out on a policy. Sometimes literally for things that have nothing to do with the problem. If they can find an out, however slight, they will take it. Lying about a smoking would be an easy one for them.
IIRC the new health care laws are stopping some of this but not sure how far it goes.
Every smoker I know lies about being a smoker. I’ve never heard of it being a problem for them, although none of them have had to be treated for lung cancer, etc…
I lied about my weight while applying for health insurance, and there were no consequences, even though I went to several different doctor multiple times while on the plan and my weight wasn’t particularly close to the stated number. I ended up cancelling that plan after a few years though.
This was a big problem with the housing department at my alma mater. Students would fill out the questionnaire designed to help match you with a compatible dormmate, and lots of people would lie and say they didn’t smoke. Plenty of complaints came in from people who wanted to live with a nonsmoker but were instead paired with a liar.
What they change in the practice of collecting premiums on a policy that the insurer has no intention of honoring. IIRC, an insurer is required to cancel a policy within a certain period of its formation if it intends to rely on fraud in initial answers in order to void the policy. This is a common provision in state-level insurance regulation in various industries.
I don’t know if that made it into the final package, since it has the obvious consequence of costing the insurance companies some money to investigate the accuracy of application answers prior to a claim.
Well, yes, I imagine it would be. The question was about other consequences.
Say Xavier, a smoker, lies about this on his health insurance application. Three years later he is hospitalized for something unrelated, like a leg broken while skiing, or being hit by a bus. Upon admission to the hospital, a half a pack of smokes is in his pocket along with a lighter. Eventually the insurance company reads this on some report or other. Do they make X pay the higher rates for the past years’ premiums? Can they refuse to pay for his broken leg? Can they make him pay back other medical expenses they’ve paid over the last 3 years?
I know there’s a no-contest rule about life insurance. Does that apply to health insurance, too? How about things other than smoking? I’m sure insurance rates are higher for people who engage in other risky activities (like skiing). How about if things change in the time since the insurance was obtained?
My good friend was an insurance agent and a pilot. I wanted to start taking flying lessons and was excieted to do so. Just about that time I decided to get life insurance to protect my family (no, it wasn’t because I thought I would become a big smoking hole in the ground) and he advised me to not start flying until 30 days after the policy I purchased became effective.
The reason being is they specifically ask you on the policy if you are a pilot. If you check yes, your rates are higher. By delaying the start of my lessons, I could truthfully answer no and he explained that anything started after the policy was in effect wouldn’t be held against me.
Being a smoker three years after filling out the application does not prove you were a smoker when you applied. However, if they decded to investigated and could prove fraud, you better believe they would rescind the policy (they do have to return all preiums paid). They might not bother for a broken leg, but expensive cancer treatment?
I suspect that the exact scenario will play out differently in each of the 50 states, but in general, insurance companies love to rescind a policy for inaccurate information on an application. This process, called ‘rescission’ applies in the case of fraudulent or deliberate misrepresentation of medical history. Arguably, it has been misused and coverage has been rescinded for things like forgetting to list acne treatments. Rather than pay for some expensive treatment, some companies have searched high and low for any reason to rescind.
Misuse of this practice is supposed to be curtailed by the new law but according to this, it will still apply after 2014. I am not clear on the actual effect since post 2014, you cannot be denied coverage (aka Guaranteed Issue) or pay more than others of the same age (aka Community Rating). So, if you lie and have a policy rescinded - I guess you can just go out and buy another one ???
What can happen is even if you lie on your application, it is much less likely you’re lying to your doctor. And when he does your physical, he’s going to use the ICD9 coding for ‘tobacco use disorder’ as part of the claim he submits back to the insurance company to get paid. If you’re going to lie about smoking, you’re going to have to consistently lie to all your health care providers, not just on the initial insurance application. Otherwise, it will filter through eventually, somehow, from somewhere.
