California Regulators Send Alerts About Options for New Coverage
About 3,400 California residents whose health insurance was canceled by Kaiser Permanente, Health Net and PacifiCare soon will be notified that they might be eligible for new coverage and compensation for medical bills incurred while they were uninsured, the Los Angeles Times reports.
Under an agreement with the California Department of Managed Health Care, the insurers will reinstate policies of members whose coverage was inappropriately canceled, regardless of pre-existing medical conditions, and reimburse them for medical expenses.
In exchange, the state will close its investigation into the insurers' rescission practices.
At a hearing in a lawsuit brought against Health Net on Friday, lawyers representing policyholders expressed concern about a plan for insurers to notify former members about the agreement.
Mike Bidart, a lawyer representing policyholders, said that state law requires such notices to go through lawyers.
Los Angeles County Superior Court Judge Victoria Chaney scheduled a hearing for Sept. 2 to address the issue.
Then late Monday Bidart said he learned that DMHC planned to send the notices. He added, "I'm sure they are doing this because the courts don't currently have jurisdiction over the DMHC."
DMHC Director Cindy Ehnes defended the department's actions and said former policyholders could address their cancellations through the department's process, which would send each case to a third-party arbitrator, or wait for the outcome of a class-action lawsuit.
Regulators began mailing notices of potential reinstatement on Tuesday (Girion, Los Angeles Times, 8/13).
Separate from DMHC's action against health insurers, Los Angeles City Attorney Rocky Delgadillo has filed a series of civil actions against health insurers for their rescission practices under a California statute commonly called the Unfair Competition Law, the Los Angeles Daily Journal reports.
The suits against Blue Shield of California, Anthem Blue Cross and Health Net allege that the insurers engaged in fraudulent business practices and false advertising by committing to cover medical claims and then launching investigations to rescind coverage when members submitted costly claims.
Bringing the case under the Unfair Competition Law raises the potential for large financial penalties and could result in the court appointing a receiver to administer any settlement.
DMHC's agreements with insurers have not called for someone to oversee the settlements.
The Unfair Competition Law has not been widely used among city attorneys or district attorneys in similar cases, and Delgadillo's use of the statute has drawn both praise and criticism from people in California legal circles (George, Los Angeles Daily Journal, 8/13).