In the comment thread following Friday's post on health care, I asked why there should be a public option in any insurance exchange? In response, former local blogger Seth Zlotocha pointed to policy rescission - the possibility that an insurance company may rescind coverage after you get sick based on a misrepresentation regarding your health history at the time you applied for coverage.
National commentators have also advanced this as a reason for a public option.
There may be a justification for a public option, but this is not one of them. First, rescission can affect relatively few people. Most of us obtain coverage from our employers in ERISA qualified plans. Rescission is basically nonexistent in such plans. The reason is that the law makes it essentially impossible to deny coverage for preexisting conditions. If you have what is known as "creditable coverage" (basically meaning that you were part of a group plan in the year before you joined your new employer), preexisting conditions are are likely to be covered from day one. For example, when I moved from Rite Hite to Marquette, any claims for treatment of preexisting conditions (and I had a rather expensive one about a day after joining the faculty)were covered - and, by law, had to be because I was covered by Rite Hite.
Even for those who lacked creditable coverage, preexisting conditions must be covered after a waiting period (usually twelve months) and, even then, can only be denied with respect to conditions for which the enrollee sought treatment in the preceding six months.
In other words, most folks are not subject to even the possibility of rescission.
This is not to say that the law governing rescission is perfect or that in all cases every insurer follows the law. There is no law that isn't broken. But rescission - which is extremely rare even within the universe of individual policies to which it applies - is not much of an argument for a public option. If you think it is too easy to rescind a policy, the more direct solution would be to limit rescission to cases of intentional misrepresentation or tighten materiality standards (i.e., the relationship between the misrepresenation and the condition that the insured now seeks to have covered.)