Paul Krugman points out the astonishingly obvious reason that people are not beating up their congressional representatives to reform the health care system is because we have enough Government intervention that it makes it look like the system works. Of course, if it wasn't for the government managed health-care, recission would be a household word since anyone who got seriously sick would have upto a 50% chance of experiencing it.
If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two. You have three times better odds playing Russian Roulette.
Our free market health insurance serves sick people really badly. And the free marketeers think that's okay.