Two of the state's largest health plans agreed Thursday to reinstate coverage to nearly 1,200 patients whose policies were dropped after they incurred high medical expenses.
Under the deal, patients whose insurance was rescinded by Kaiser Permanente or Health Net since 2004 will be allowed to purchase new insurance regardless of preexisting medical conditions.
The settlement, brokered by the California Department of Managed Health Care, comes three months after a Gardena hair salon owner won an unprecedented $9-million judgment against Health Net for canceling her coverage while she was undergoing chemotherapy, halting her treatment.
Gov. Arnold Schwarzenegger called the settlement groundbreaking.
"This important settlement should pave the way to similar agreements with other health plans to reinstate health coverage," he said. "Patients should not live in fear of losing their healthcare coverage when they need it most."
The state is trying to reach similar deals with Anthem Blue Cross, Blue Shield and PacifiCare involving about 4,000 rescissions.
Insurance rescissions affect people with individual coverage, which is sold and priced based on an applicant's medical history. Insurers say some enrollees lie on applications in order to gain coverage and that rescinding policies from those who hide preexisting conditions prevents premiums from going up for everyone.
But regulators and law enforcement officials allege that insurers do little to verify applications before issuing coverage and then wait to see what happens. When patients incur substantial medical claims, insurers go back and scour applications for omissions, even innocent ones, in order to rescind their coverage, critics say.
About 2.6 million of the 28 million Californians with health coverage have individual plans.
Kaiser spokesman Mike Lassiter said the insurer proposed the deal to reinstate up to 1,092 former enrollees -- all those whose coverage the health maintenance organization dropped between the time it began the controversial practice in April 2004 and when it halted rescissions in October 2006.
Kaiser agreed to pay a $300,000 fine to the state without admitting wrongdoing. It also agreed to make a number of procedural changes, including developing simpler coverage applications to avoid applicant mistakes that often form the basis for rescissions.
