WASHINGTON – A report issued by the Department of Health and Human Services indicates the current health insurance system "leaves millions behind" due to coverage denial practices.

The report, issued Tuesday, cites a recent national survey showing 12.6 million non-elderly adults – 36 percent of those who tried to buy insurance on the private market – were deemed ineligible for coverage by insurance agencies. Many of the denied patients had cancer. According to the survey, insurance companies either charged a higher premium or refused to cover the condition.

Another survey cited in the report found one in 10 people with cancer said they could not get health coverage, and 6 percent said they lost their coverage because of their diagnosis.

"The insurance company practice of denying coverage because of pre-existing conditions is not confined to serious diseases," HHS officials said. "Even minor problems such as hay fever could trigger prohibitive responses."

An insurer could charge high premiums, deny coverage or set a restriction such as denying any respiratory disease coverage to a person with hay fever, according to the report.

The study also found that some insurance companies respond to an expensive condition such as cancer by initiating a thorough review of the patient's health insurance application. If the insurer discovers that any medical condition, regardless of how minor, was not reported on the application, it could revoke coverage retroactively for the patient and possibly all members of the patient's family, the report said. That practice is known as rescission.

Companies can do this even if the condition found is not related to the expensive condition or if the person wasn't aware of the condition at the time. At least one company encouraged employees to revoke sick people's health coverage through rescissions, the report said.

Under proposed health insurance reform, insurance companies would be prohibited from refusing coverage based on someone's medical history or health risk. Companies also would be barred from watering down coverage or refusing renewal because someone becomes sick. Companies would have to renew any policy as long as the policyholder pays the premium in full.