State to review canceled health insurance policies

Thousands of people whose policies were canceled by California health insurers will have a chance to win back their coverage and get outstanding medical bills paid as a result of an unprecedented move announced by the Schwarzenegger administration today.

The state's action is the boldest yet in dealing with the industry's increasingly controversial practice of canceling individual coverage -- known as rescission -- after patients have gotten sick and submitted medical bills.

Cindy Ehnes, the director of the Department of Managed Health Care, said she would reopen every medical insurance policy dropped over the last four years by the state's five major insurers and submit them for reconsideration to an independent arbiter.

Those determined to have been wrongly canceled would be reinstated and the insurers would be responsible for medical bills incurred while patients were without coverage, she said.

"Rescission is a harsh practice," Ehnes said. "It strips people of coverage and causes them to be uninsurable at the very time they need it most. For the first time we are giving people a second chance to get that health coverage.

"We are putting our full regulatory and enforcement action to work on this. We are opening the door to health coverage for those thousands of Californians who have been impacted over the last four years."

Ehnes' department, Insurance Commissioner Steve Poizner, Los Angeles City Atty. Rocky Delgadillo, lawmakers, legislative committees and the courts are all considering various aspects of the policy cancellations. The state insurers have defended the cancellations as rare and necessary to root out fraud.

An insurance industry spokesman said today that the health plans involved were already seeking to improve their cancellation policies and procedures.

Christopher Ohman, president of the California Assn. of Health Plans, said, "On their own, health plans have been implementing new policies to strengthen and make more transparent the process for rescinding policies."

That includes, he said, "developing an outside third-party review process in which an independent agent validates whether a rescission is warranted. Plans also have simplified and clarified their application processes and enhanced staff training."

Gov. Arnold Schwarzenegger hailed the announcement. "It's outrageous that innocent patients have to live in fear of losing their health care coverage," he said. " I look forward to working with my partners in the Legislature to ensure this egregious practice is stopped."