State regulators moved Tuesday to limit insurers' ability to cancel medical coverage after patients get sick, proposing that companies be required to check up on an applicant's health before issuing a policy in the first place.
The Department of Managed Health Care, which governs health plans known as HMOs, and the Department of Insurance, which supervises insurance companies, said they would propose rules that reinforced existing laws forbidding rescissions except when they could show a policyholder was at fault. It marked the first time the two agencies had acted in concert on any regulations.
"We felt that it was extremely important that consumers be protected regardless of the insurance product they had and we wanted to send a very strong message nationally that we regard this practice as one that must be done away with," healthcare agency Director Cindy Ehnes said.
Gov. Arnold Schwarzenegger recently signed into law a bill introduced by Assemblyman Hector De La Torre (D-South Gate) that will require insurers to pay hospitals and physicians for authorized care even if insurers later revoke coverage. The law takes effect in January.
Both the proposed regulations and the bill were drafted to address problems associated with the loss of coverage that were highlighted in a series of articles in The Times. A state investigation into rescissions led to fines against Blue Cross of California and Kaiser Permanente.
Insurance Commissioner Steve Poizner said the two agencies wanted consumers and the industry "to know that we will stand shoulder to shoulder to address" unjust rescissions.
The agencies said they would propose parallel regulations drawn from laws that forbid insurers from withdrawing coverage unless a policyholder knowingly lied or omitted medical history information to obtain a policy.
Insurers, which have said that they rescind a small fraction of policies and that the practice is a responsible hedge against fraud, called the proposed regulations overly broad and costly. Patient advocates said they didn't go far enough.
Insurers maintain that California law states a company doesn't have to prove that an applicant for a policy intended to mislead the company for it to cancel coverage.
The proposed regulations say that a company can't cancel coverage unless a policyholder makes a "willful misrepresentation" on an application.
