Health Insurer Lets Outsiders Decide

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Companies have to keep their customers happy -- even those that they're hoping will become former customers.

Yesterday, Aetna (NYSE: AET) announced that it'll allow customers with individual health plans to ask for an independent external review before Aetna cancels their policy. Aetna will pay for the review and be bound by the decision of the outside panel. Policy rescission, the fancy term for canceling a policy, usually happens because the insurer thinks there's fraud involved with the claims.

While the rate is extremely low -- Aetna cancels about three out of every 10,000 policies -- the media love to glom onto stories about rescinded policies. What's more touching than a family facing sky-high medical bills after their mean old insurance agency cancels their policy? Who cares if the family lied to the insurance company to get the policy in the first place.

By making a third party responsible for the final decision, Aetna is trying to take the blame off of itself and put it on a mysterious panel of doctors who must know what they're talking about. That should help its public persona, and I'd expect other insurers like UnitedHealth Group (NYSE: UNH), Humana (NYSE: HUM), and WellPoint (NYSE: WLP) to follow suit, if they haven't already.

For the most part, insurers don't have to worry too much about their public reputation, since employers are usually picking the health-care insurance company -- not the individual employees. But there are still some people who sign up with individual plans, and this policy change could help Aetna bring them in. The cost of the external review for the customers it doesn't want seems like a small price to pay to potentially gain additional customers.

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