Health insurers to meet with state agency on rescission probe

The meeting was called by the Department of Managed Health Care, which oversees health maintenance organizations and other types of health plans, because it was nearing completion of investigations into the cancellation practices of Health Net Inc., Kaiser Permanente and Blue Shield of California, said spokeswoman Lynne Randolph.

The department plans to discuss the standards to which it is holding the insurers' practices, she said, as well as remedies for problems identified in the probes of policy cancellations, known as rescissions.

"This is our opportunity to move forward and conclude this phase of our investigation into rescissions," Randolph said. "Our goal is to bring a quick resolution to this problem to protect consumers today from illegal rescissions."

Randolph said the results of the remaining three investigations would be announced soon but that the process -- including today's meeting with the health plans -- was confidential until then to protect the insurers' due-process rights.

The closed meeting has alarmed consumer advocates because it comes as the insurance industry is pushing a plan that critics believe could make it easier for sick patients to lose coverage through no fault of their own. But the department said the industry's proposal was not on the agenda.

California insurers -- battered by newly aggressive regulators, a $9-million court judgment and stinging criticism from lawmakers, judges and consumer advocates -- are fighting on several fronts this spring in Sacramento and elsewhere.

Insurers are under attack in California courts and the Legislature for canceling policyholders after they have incurred significant medical expense.

The state's insurers defend their cancellation policies and performance. They say that policy reviews and cancellations affect only a small percentage of policies and that the reviews are essential to combat potential fraud.

It has been a year since the department announced the results of its first major rescission investigation. In that case, it alleged that Blue Cross systematically violated state law in the way it canceled sick policyholders for purported misstatements on applications.