The settlements close the department's investigation into rescissions. But they do not directly affect Delgadillo's lawsuit, which seeks sweeping remedies and penalties in excess of $1 billion.
Nor do they end a raft of suits filed by individuals seeking financial compensation from the health plans that dropped them.
Also pending are investigations by state Insurance Commissioner Steve Poizner into the rescission practices of health plans' preferred-provider-type coverage that involve thousands more canceled policies.
The insurance industry has fought to retain the power to rescind the policies of members who fail to disclose medical information on applications that would cause a company to reject them or to charge them higher premiums. They say that rescissions are a rarely used but important tool in rooting out fraud.
But regulators, lawmakers and law enforcement officials have accused the companies of abusing that tool by using confusing applications to trick consumers into making mistakes that could later be used against them and by failing to verify medical histories before issuing coverage.
Critics contend, the companies lie in wait, collecting premiums until a member gets seriously ill and then subjecting them to an often secretive and unfair investigation.
Daniel Zingale, a healthcare advisor to the governor, said the administration was pursuing legislation that would put the burden of proving that rescissions were fair and lawful on the health insurers.
But some legal experts and consumer advocates said they believed the law already did just that.
Jerry Flanagan, healthcare policy director for Consumer Watchdog, criticized the deals -- on the heels' of the Los Angeles city attorney's scathing indictment of the companies' practices -- as outrageous.
"The regulator is rushing in to find the defendants 'not guilty' before the trial even begins," Flanagan said. "The state's largest insurers are paying pennies on the dollar for a get-out-of-jail-free card. The governor and regulators are obstructing justice by giving the defendant a favorable review to use as a shield in court."
Flanagan said that in settling with the companies, regulators failed to complete their investigations of their rescission practices -- and failed to publicly disclose their findings as to their legality.
"Punting to the Legislature is dereliction of duty," he said. "The governor doesn't need the Legislature to tell him that no innocent patient should ever lose their health insurance again."
--
lisa.girion@latimes.com
