The change is one of several that Kaiser has made or is seeking to implement in part because of the Baba case. These changes may well pave the way for broader reforms in the way HMOs handle individual policyholders when questions arise about their applications.
"We'd like to see all of the carriers on the same standard," Larreta-Moylan said. "We are working with the department ... toward that end."
The 1993 law at the center of the controversy has not been interpreted by an appellate court. But the dispute is coming to a head in other arenas. Cindy Ehnes, director of the managed care agency, has called a Jan. 29 hearing in Los Angeles to gather suggestions for regulations she is developing that would clarify the law and enhance consumer protections against unfair cancellations.
The agency issued its first fine in a rescission case in September. It fined Blue Cross of California $200,000 for its allegedly illegal cancellation of a Southern California woman's coverage because of her failure to disclose a 20-year-old corrective surgery on her application.
Blue Cross, a subsidiary of Indianapolis-based WellPoint Inc., has asked for an administrative hearing that is expected to focus on the meaning of the 1993 law.
"We disagree with the contentions," WellPoint spokeswoman Shannon Troughton said.
Troughton said the company believed the agency erred in accusing it of failing to show willful misrepresentation before rescinding the woman's healthcare coverage.
She said the company's reading of the law is that such a showing was unnecessary in her case, because it did everything it could to resolve any questions arising from her answers to the application.
"Blue Cross properly reviewed the application and all reasonable questions were resolved prior to issuing the health plan to this member," Troughton said.
A lawyer for Baba said the dropped policyholder could not discuss his case. He was a lead plaintiff in a class-action lawsuit filed in Alameda County two years ago alleging the HMO routinely canceled individual policyholders improperly. As a part of the settlement of his legal case, Baba agreed not to discuss it, his lawyer said.
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