California Regulators’ Action on Cancellations Draws National Attention
California regulators are gaining nationwide attention for a recent string of fines and penalties against health insurers for improperly canceling individual health insurance policies, Dow Jones reports.
Insurers said the cancellations are justified because members omitted information from applications for coverage, but in some cases California regulators have ruled that the omissions were accidental. State officials maintain that California law permits cancellations only if insurers can show that members intentionally misrepresented information on their applications.
The Department of Managed Health Care, which oversees HMOs in California, is in the midst of investigations of several health insurers in the state and already has levied fines against Blue Cross of California and Health Net, according to DMHC spokesperson Lynne Randolph.
In addition, a judge in a cancellation case ordered Health Net to pay more than $8 million in punitive damages, as well as the member's medical bills and damages for emotional distress.
Randolph said that insurers likely are canceling individual policies improperly in other states but that "California's farther ahead in terms of enforcement."
Dennis Barry -- a partner in the health care practice at Washington, D.C., law firm Vinson & Elkins -- said that such problems result from larger problems in the health care system and the absence of universal coverage.
To address concerns about improper cancellations, the National Association of Insurance Commissioners is working on a standard health insurance application.
Sandy Praeger, president of NAIC, said some states also are considering developing external review processes to assess whether insurers deny medically necessary care (Gerencher, Dow Jones, 3/7).