Kaiser Foundation Health Plan Inc. said Tuesday that it was working with state regulators to develop standards to protect its members from unfair cancellations of health insurance, a move that the state's largest HMO hopes could lead to industrywide reforms.
Kaiser's move comes as it was being fined $100,000 by state regulators for dropping a policyholder it accused of concealing his epilepsy when he applied for coverage, even though the condition had never been diagnosed by a physician.
Also, the policyholder was unaware of his seizures because they were accompanied by amnesia.
It is the second such fine of a health plan as the government steps up scrutiny of insurance cancellations.
Oakland-based Kaiser said its proposed standards would include the requirement that it consult with policyholders before deciding whether to rescind their coverage. Such a consultation would help the HMO determine whether policyholders intentionally submitted inaccurate information about their health conditions in order to obtain coverage.
With the move, Kaiser embraces a standard for cancellation pushed by consumer advocates, the first sign of a substantive split within the health plan industry on the issue.
Other health plans, including Blue Cross of California and its rival Blue Shield, are fighting regulators and former policyholders for the right to rescind coverage when medical information relevant to the policy-granting decision is left out of an application -- even if the omission is an honest mistake or the result of a foggy memory or poorly worded question.
Aggrieved former policyholders contend in a raft of recent lawsuits that rescinding their coverage, without questioning them or demonstrating they intended to deceive, violates a 1993 state law.
The controversy involves individual insurance, the type people without employer-based group coverage buy for themselves.
Unlike with group coverage, insurers in California can reject applicants for individual insurance based on their current and past health. That also makes individual policyholders susceptible to rescission after they have been accepted for coverage, if insurers find discrepancies in their applications.
Amy Dobberteen, enforcement chief for the Department of Managed Health Care, said Kaiser's plan to talk to policyholders first was a shift in the right direction.
