California Individual And Group Health Insurance Plans

The Los Angeles Times - By Lisa Girion, Times Staff Writer -Nov. 14: Under mounting pressure from consumer advocates, the state's HMO regulator plans to introduce a rule that would make it harder for health insurers to drop policyholders after they get sick.Cindy Ehnes, director of the Department of Managed Health Care, is expected to propose that insurers be required to maintain coverage unless they show an individual lied about his or her medical condition to obtain it.Health plans routinely cancel policies because of inaccurate or incomplete information on medical history questionnaires, regardless of whether the policyholder meant to deceive the companies.Ehnes plans "to move forward with some kind of clarifying regulation," department spokeswoman Lynne Randolph said Monday, declining to provide details. Consumer advocates said such a rule was long overdue, but industry officials warned that it could drive up costs and result in higher premiums for consumers. Health insurers say they revoke only a small fraction of policies.The push for a stronger rule comes after a series of Los Angeles Times articles examining insurers' cancellation practices.At issue is individual health insurance, which, unlike group coverage, allows insurers to reject applicants deemed to be too risky based on their medical history and their answers to a detailed health questionnaire.Randolph disclosed Ehnes' plans in response to a petition the department received Monday from consumer advocates. The petition demanded that the agency move to stop the industrywide practice of canceling policies over misinformation in applications, whether or not the policyholder intended to lie.The petition was filed by the Foundation for Taxpayer and Consumer Rights, a Santa Monica group that was instrumental in the adoption of auto-insurance rate reforms and enhanced patient protections against HMO treatment denials. The group's petition says a 1993 state law clearly prohibits the cancellation of health insurance unless a company can prove "willful misrepresentation."Foundation spokesman Jerry Flanagan said insurers were free to violate that law because the department failed to enforce it until recently and never adopted implementing regulations. "These regulations are 13 years overdue," he said.But industry officials say the law allows insurers to cancel policies when they find policyholders failed to disclose all relevant facts in their medical history on applications, regardless of whether the applicant intentionally lied.That helps root out fraud and keep health insurance relatively affordable in California, said Chris Ohman, president of the California Assn. of Health Plans. If the department moves to a tougher standard for revocations, he said, costs will go up."We don't think there's need for new regulations, and we think the standard is well set and it's been in practice for a number of years," Ohman said. "The last thing we would want is for individual insurance to increase in cost, exacerbating the affordability problem."WellPoint Inc., parent of Blue Cross of California, maintains that it is following the law and that there is no need for new rules. "The current law is clear," said Shannon Troughton, a spokeswoman for Indianapolis-based WellPoint.The cancellation backlash erupted last spring when a raft of policyholders filed lawsuits alleging that Blue Cross, Blue Shield of California, Kaiser and other health plans illegally revoked their coverage after they got sick as a way to avoid paying expensive claims.The plaintiffs included the family of a 6-year-old Murrieta girl who was dropped by the insurer in the midst of treatment for a life-threatening tumor in her jaw. Also among the plaintiffs was a Riverside couple forced to put their home up for sale after they were hit with a mountain of medical bills.Hospitals then filed a proposed class-action suit against Blue Cross, alleging that the company was ignoring a law that required insurers to pay for authorized medical care even if coverage was later revoked.In October, Blue Cross settled for undisclosed amounts more than 70 suits and claims filed by patients who alleged that the state's largest health plan illegally dropped them.The department launched investigations into not only the individual policyholders' complaints but also the insurers' cancellation practices. Those investigations are not expected to be completed until next year.But Ehnes has seen enough to conclude that a new regulation is necessary, said Randolph, the department spokeswoman. The department, which was set up in response to perceived abuses in the way health maintenance organizations decide to authorize or deny treatment, had sided with insurers in all 289 cancellation complaints consumers had filed since 2000. In September, however, the department did an about-face. Ehnes issued its first sanction in a cancellation, fining Blue Cross $200,000 after finding the it illegally revoked the policy of a Southern California woman. In early October, the department ordered Kaiser Foundation Health Plan to reinstate coverage of a Northern California woman with kidney disease.