California Insurance Commissioner Steve Poizner plans to unveil proposed regulations today to combat the health insurance industry practice of dropping members with costly illnesses.
Poizner's draft regulations would require insurers to write applications for coverage in plain English and allow applicants a "not sure" answer to questions about their preexisting medical conditions. In addition, they would bar insurers from dropping someone if the companies failed to thoroughly investigate an applicant's medical history before issuing a policy.
Even if an insurer did all that, the rules would bar a cancellation if the patient was unaware of the medical information being sought on the application or failed to appreciate its significance.
It is the latest effort to curb rescission, an industrywide practice that has deprived thousands of Californians of healthcare coverage when they were sick, left many with crushing medical bills and saddled physicians and hospitals with uncollectible debt.
The once-hidden practice has drawn scrutiny since it was exposed in a series of Times articles over the last three years.
Consumer advocates said the rules would make it virtually impossible for insurers to drop people over innocent mistakes, omissions and misunderstandings. Insurers said they were reviewing the proposal.
Poizner said it would "deliver a dose of preventive medicine for rescissions."
"Consumers deserve to have their insurance companies hold up their end of the deal, paying out claims and not canceling coverage when it's needed most," he said.
The proposed regulations "will give insurers the guidance they need to follow the law and help prevent illegal rescissions."
Poizner set a public hearing on the rules for July 20 in San Francisco and may revise them based on testimony there and on written comments. He is expected to issue a final set of rules sometime in the fall.
William Shernoff, a Claremont lawyer who represents hundreds of people who lost coverage, said the regulations "would be a great step forward."
"These are very good, pro-consumer regulations that should be enacted tomorrow," he said. "There is not one insurer in the past that has even come close to complying with regulations like this. And if they take effect, there would be very little rescission activity, very little."
But the effectiveness of the proposed rules, if they become law, will depend on enforcement, said Bryan Liang, director of the Health Law Studies Institute at California Western Law School in San Diego.
"If we don't have real action, we're just going to revisit this issue over and over again," he said. "We really do need some significant amount of guts on the part of the regulators to enforce."
The regulations would apply to individual health coverage sold by Anthem Blue Cross Life & Health, Blue Shield Life & Health, Health Net and other companies licensed by the Department of Insurance.
A second regulator, the Department of Managed Health Care, had said more than two years ago that it would pursue rescission regulations in response to a petition filed by Consumer Watchdog, a Santa Monica advocacy group.
But such rules never came to pass. The Department of Managed Health Care oversees all of the health maintenance organization coverage and some of the preferred-provider-organization coverage in California.
In a statement Tuesday, the department confirmed that it was no longer pursuing regulations and would rely instead on agreements it had reached with five of the state's largest health plans, including Anthem Blue Cross, Kaiser Permanente and Blue Shield of California.
"We support statutory changes to make those protections permanent and consistent between the two regulators," said Lynne Randolph, spokeswoman for the department.
With that in mind, consumer advocates said they planned to keep the pressure on Poizner, a Republican who is running for governor.
"The test for Poizner is not introducing a strong regulation but finishing the process and standing up to the insurance companies," said Jerry Flanagan, an advocate with Consumer Watchdog. "The public will be watching to see if Poizner sticks to his guns."
The state Assembly is expected to vote soon on a bill that would set a high bar on rescissions for people who purchase individual insurance of all types, regardless of who regulates it.
The bill by Assemblyman Hector De La Torre (D-South Gate) would require insurers to clean up their applications.
And it would bar cancellations unless an insurer could prove that an applicant willfully misrepresented his or her medical history on an application.
Lawmakers approved a similar bill last year, but it was vetoed by Gov. Arnold Schwarzenegger.
The governor has not said where he stands on the new bill.