Health insurance is an expensive benefit, with premiums based on an assessment of the insurance carrier’s risk in covering employees. That’s why many insurance companies require employees who want to enroll for coverage to provide a complete medical history. Otherwise, the insurer can’t calculate an appropriate premium to cover its risk.
Remind employees that they must be honest when filling out insurance sign-up forms. Otherwise, they—and your company—may be sued later to recover the medical costs associated with undisclosed pre-existing conditions. That could cost everyone far more than the premiums saved by not disclosing medical conditions.
Recent case: When her employer contracted with a health insurer for group health benefits, Loan Tran had to fill out an application. She sought coverage for her husband and son. The form asked about specific pre-existing conditions, including hemophilia—which Tran’s son has. She did not list the condition, and the company submitted the group application and paid premiums based on the incomplete information.
Later, after Tran’s son had incurred over $500,000 in medical bills, the insurer sued Tran and her employer for falsifying the application. It demanded the money back.
The insurer lost on a technicality because it waited too long to sue. Otherwise, the employer might have found itself on the hook, since it would be unlikely that the employee could pay the claim. (Medical Mutual of Ohio v. K. Amelia Enterprises, et al., No. 07-4422, 6th Cir., 2008)
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