State response to coverage rescissions to get critical look

March 7, 2010

The practice of health insurance companies rescinding coverage for customers after they file expensive claims will be in the spotlight again this week at the Capitol.

The Assembly Committee on Accountability and Administrative Review plans a special hearing Wednesday to examine how the two state departments that regulate health insurers and managed care plans have handled the issue.

Among other things, the committee will review how the state response to rescissions has differed from actions taken by the Los Angeles City Attorney’s office, which sued Health Net and obtained a settlement that appears to be far better for consumers than the enforcement actions taken by the state.

The Department of Insurance and the Department of Managed Health Care reached settlements with five companies in 2008 and 2009 after they were found to have wrongly taken away coverage from thousands of their customers. Although some of cases ended in large fines, including a $10 million penalty against Blue Cross, their customers were required in most cases to go through an arbitration process to obtain reimbursement for the bills they had while they were without coverage.

In the Los Angeles settlement, Health Net paid a $2 million fine, paid $3.6 million in damages, agreed to a moratorium on recissions and is reimbursing customers as they submit receipts for the cost of their care. The company also agreed to establish an independent panel to review future recissions.

The insurers and health plans have maintained that they take away coverage only after customers are found to have been deliberately misleading on their insurance applications. To give up that right, the companies argue, would open the door to widespread fraud.

The hearing is scheduled for Wednesday at 9 a.m. in Room 437 of the Capitol.

–Daniel Weintraub

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One Response to State response to coverage rescissions to get critical look

  1. DrSmallC

    March 9, 2010 at 2:40 pm

    If you can’t make the committee meeting (like me) you can still view the happenings of Senate and Assembly committee meetings on the web: https://www.calchannel.com/

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