Insurance Association Files Suit Over New Anti-Rescission Rules

This week, the Association of California Life and Health Insurance Companies filed a lawsuit seeking to nullify new state regulations designed to make it more difficult for insurers to rescind members' health insurance coverage, the AP/San Francisco Chronicle reports.

Regulation Details

The California Department of Insurance's new rules -- which took effect Wednesday -- require insurers to investigate individual policyholders' medical backgrounds prior to accepting any premiums (Mohajer, AP/San Francisco Chronicle, 8/19).

The rules also require insurers to:

• Limit application questions about health conditions and histories to only those required for medical underwriting;
• Require that all questions on an insurance application be clear, specific and easy to understand;
• Offer applicants the option to indicate that they are unsure or cannot remember the answer to a health history question;
• Provide policyholders with a copy of their application to allow them to check for possible errors; and
• Allow members the opportunity to respond during investigations that could lead to a policy rescission (California Healthline, 8/6).

Impetus for Lawsuit

ACLHIC contends that the state exceeded its authority by enacting new regulations that are incongruous with California's existing insurance code.

Richard Wiebe, a spokesperson for the trade group, said the regulations will impose unnecessary administrative and financial burdens on insurers because they require the companies to review several years of health records, even if rescission is not under consideration.

He added that the evaluations could take up to six weeks to complete and might lead to higher premiums.

Poizner Responds to Lawsuit

On Thursday, Insurance Commissioner Steve Poizner (R) said the lawsuit challenging the new regulations was "shortsighted and morally wrong." He added, "Illegal policy rescissions are a repugnant industry practice."

Next Steps

A hearing on the case is scheduled to take place on Friday (AP/San Francisco Chronicle, 8/19).