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Why This Matters: A Colorado Story

Via the Boulder Daily Camera:  Jennifer Latham is a Colorado preschool teacher with four children, who suffered multiple, debilitating injuries when she was hit by a car in 2005. She spent two months in the hospital recovering, running up $185,000 in medical expenses. She was lucky to have health insurance.

Or so Latham thought. Shortly after coming home, the insurer, Time Insurance Co., told her that it was refusing to pay the bill and that it would be canceling her coverage outright. The reason? When applying for her insurance coverage, the insurer said, she'd failed to disclose two past medical incidents--an emergency room visit for shortness of breath and an episode of uterine prolapse. Not only did that leave her on the hook for $185,000; it also left her without insurance, since no private carrier would touch her after the injuries and cancellation.

Latham had the good sense to sue--and a Colorado jury had the good sense to side with her. Last week, it ordered Time Insurance Co., which also operates as Assurant Health, to pay her $37 million. Latham's lawyer had asked only for $7 to $8 million in damages. Apparently, the jury found the whole incident revolting.

As well they should have. Assurant isn't commenting on the case, except to say it only cancels policies in cases of fraud. And it will surely appeal. But this phenomenon--of insurers canceling policies when people file big claims--is one of the most well-documented problems of our health care system.

Although some people really do lie about their medical histories deliberately, in many cases it's because they have no other way to get coverage. And that's not to mention the many additional cases, apparently including this one, when insurers look for inconsequential omissions as an excuse to avoid paying large bills and to get rid of beneficiaries who will run up high bills.

(Want some more stories like that? Read this.)

Of course, the vast majority of people in these situations will never bring a lawsuit, let alone win a multi-million dollar verdict. But there's an easier way to help them: Prohibiting insurers from canceling policies retroactively and from discriminating against people with pre-existing medical conditions in the first place.

As it happens, a bill before Congress would do just that. It's called the "Patient Protection and Affordable Care Act."

Perhaps you're familiar with it.

Update: More from Denver Westword, which apparently first reported the story...

Jurors contacted by Westword say that Assurant failed to prove that Latham deliberately misrepresented her health on her application or that the company had conducted a reasonable investigation before revoking her coverage. Testimony indicated that the company's "rescission panel" reviewed more than a hundred cases in two hours--"68 seconds apiece," as Latham attorney Marc Levy put it in his closing argument.

"We had to determine who was lying," says juror Denise Kaatz, a production manager for a Louisville apparel company. "Most of their witnesses seemed dishonest, defensive and just showed a basic lack of humanity. It was kind of frightening." ...

Levy argued during the two-week trial that the company had declined to change its rescission process despite a fine from the Colorado Division of Insurance and other complaints. The jury was aware of a similar lawsuit in South Carolina but wasn't told that case resulted in a $10 million punitive damage award against Time.

"We realized that $37 million is a lot of money," says Kaatz. "But we felt we had to send a message. Anything less, and the message might not have been heard by Time, since they've continued with this practice for the past five years despite other lawsuits."

A spokesman for Time Insurance said that the company doesn't comment on litigation.