UPDATE 3-UnitedHealth to stop dropping policies of sick

* UnitedHealth won’t drop coverage except for fraud

* Follows WellPoint decision to move May 1

* Healthcare law sets Sept. 23 deadline
(Adds Humana, Aetna, HHS comment)

By Susan Heavey

WASHINGTON, April 28 (BestGrowthStock) – UnitedHealth Group Inc
(UNH.N: ) said it will immediately stop terminating healthcare
coverage for policyholders after they become ill, joining
WellPoint Inc (WLP.N: ) in complying with a new healthcare law
months ahead of schedule under pressure from Democrats.

The law, passed in March, gives health insurers until
Sept. 23 to stop several controversial practices, including
ending coverage for patients after they get sick, a practice
called rescission.

“In the spirit of the recently passed health reform
legislation, UnitedHealthcare moved quickly to eliminate the
practice of rescission, except in cases of fraud or intentional
misrepresentation of material fact,” UnitedHealthcare President
Gail Boudreaux said in a statement on Wednesday.

WellPoint on Tuesday said it would end rescission May 1.

The decisions come after Democratic lawmakers and the Obama
administration urged health insurance companies to immediately
stop rescission. Their calls followed an April 22 Reuters
report that said WellPoint used computer algorithms to target
women with breast cancer for an investigation, with the intent
of canceling their healthcare policies. [ID:nN20207082]

WellPoint has called the story inaccurate, but Reuters has
stood by the report.

The law bans rescission except in cases of fraud or
misrepresentation, but some companies said their practices
already comply with the reforms.

Humana Inc (HUM.N: ) and Aetna Inc (AET.N: ) said they believe
their current practices already substantially comply with the
pending rules.

Aetna, the No. 3 U.S. health insurer, is waiting for the
government to issue details behind the law, but “is ready to
make any changes we need to to make sure we’re in full
compliance,” spokesman Matt Wiggin told Reuters.

Assurant Inc (AIZ.N: ) unit Assurant Health has said it would
end rescission ahead of the deadline but did not say when.

The Reuters story triggered a rebuke from U.S. Health
Secretary Kathleen Sebelius, who last week urged WellPoint and
others to step up compliance.

“The days when insurers can drop coverage when patients get
sick are coming to an end but insurers don’t need to wait to do
the right thing,” Sebelius said on Wednesday after the
UnitedHealth and WellPoint decisions.

A number of insurers have already implemented a reform
extending coverage to young people until age 26, a change also
due in September along with the end of refusing to cover
children with pre-existing conditions.

Democrats, in letters to seven insurers on Tuesday, said
the companies should implement the rescission ban immediately
and institute independent, third-party reviews of any decisions
to drop coverage.

UnitedHealth “is aggressively seeking outside vendors and
will be instituting independent, external third party review in
the near term,” the company said.

Humana, Aetna and Assurant Health have said they have
third-party review systems in place.

Stock Market Analysis

(Reporting by Susan Heavey; additional reporting by Lewis
Krauskopf in New York; editing by Maureen Bavdek, Robert
MacMillan and Bernard Orr)

UPDATE 3-UnitedHealth to stop dropping policies of sick