Eventually, Mitchell retained legal counsel to have his health insurance reinstated, but Fortis ignored them as well. It was only after the insurance company was sued -- some 22 months after his HIV diagnosis -- that Mitchell's insurance was reinstated.

COST CONTAINMENT

In his order, Nettles said Mitchell's treatment was typical of how Fortis treated patients recently diagnosed with HIV and other life-threatening diseases.

"In addition to these acts toward (Mitchell) there was evidence that Fortis has for some time been making recommendations for rescission, and acting on those recommendations, without good-faith investigation conducted fairly and objectively ... Fortis pre-programed its computer to recognize the billing codes for expensive health conditions, which triggers an automatic fraud investigation by its "Cost Containment" division whenever such a code is recognized."

A federal investigator who has reviewed Assurant's remaining records says that they showed that once a person with HIV was targeted with a fraud investigation, the company made a greater effort than usual to cancel the person's insurance. Policies and medical records were scrutinized to a greater extent than others being scrutinized, he said.

The investigator, who spoke on condition of anonymity, said that the motive for focusing on people with HIV was simply the high cost of treating the illness: "We are talking a lifetime of therapy, a lifetime of care ... a lot of bills. Nowadays someone with HIV can live a normal life for decades. This was about money."

No evidence has emerged that any other major American company purged policyholders simply because they had HIV. But an investigation this summer by the House Energy and Commerce Committee as well as earlier ones by state regulators in California, New York and Connecticut, found that thousands of vulnerable and seriously ill policyholders have had their coverage canceled by many of the nation's largest insurance companies without any legal basis. The congressional committee found that three insurance companies alone saved at least $300 million over five years from rescission. One of those three companies was Assurant.

The committee estimated that Assurant alone profited by more than $150 million between 2003 and 2007 from rescission.

During his appearance on June 16 before the House Energy and Commerce Committee, Hamm, the CEO and President of Assurant, urged Congress to pass the new health care legislation, in part, to prevent such practices.

"We can achieve the goal we share -- providing health care coverage for all Americans," Hamm said. "If a system can be created where coverage is available to everyone and all Americans are required to participate, the process we are addressing today, rescission, becomes unnecessary."

(Additional reporting by Lewis Krauskopf, editing by Jim Impoco and Claudia Parsons)

Insurer targeted HIV patients to drop coverage | Reuters