Investigation Finds Few Consumers Joined State Rescission Settlement
Few people who had their health insurance policies rescinded have chosen to participate in a state plan intended to recoup medical costs they paid out-of-pocket after losing their coverage and obtain new health insurance policies, a Los Angeles Daily Journal investigation found (subscription required).
For the investigation, the Journal obtained files through the California Public Records Act.
The state plan followed a series of legal settlements between the state and:
- Anthem Blue Cross;
- Blue Shield of California;
- Health Net;
- Kaiser Permanente; and
State regulators investigated health plans for improper rescissions after they became aware of private lawsuits over policyholders losing coverage because of errors or omissions in their insurance applications.
Starting in August 2008, the health plans and the department mailed 3,392 notices to Californians whose individual health insurance policies had been rescinded since 2004, but about one-fifth of eligible consumers could not be located.
The letter informed the consumers that they could buy a new policy from their previous insurer at similar rates despite pre-existing conditions. The letter also indicated that patients could accept a private financial offer from the health plan to cover costs they paid out-of-pocket after losing coverage or participate in an "expedited review process."
The letter stated that the arbitration process details would follow.
Anthem Blue Cross also offered former members the option of accepting $1,000 "no questions asked" in exchange for dropping all claims against the company.
According to the Daily Journal's investigation:
- Only 5% of patients who wanted to participate in the state's plan or were aware of it took part in the settlement;
- Of the 300 consumers who said they were interested in settling disputes over out-of-pocket medical expenses, none went through DMHC's arbitration process; and
- 188 people whose coverage had been rescinded said they were interested in purchasing new coverage, and 177 went ahead and bought the new policies.
In addition, DMHC has received reports of four cases in which people whose coverage was rescinded reached private settlements with insurers.
Response to Findings
The state has not looked into why so few patients took out new coverage.
The department has defended the settlements, with DMHC spokesperson Lynne Randolph saying, "We were able to provide that for them in a quick way where they wouldn't have to go through a lengthy court battle."
When asked why some medical bills had not been addressed, Randolph said separate lawsuits by private lawyers and the Los Angeles city attorney had hampered the state's efforts to send settlement notices.
Bryan Liang, the executive director of the Institute for Health Law Studies at the California Western School of Law, said he plans to ask DMHC or the legislature to investigate why more people have not participated in the effort (George, Los Angeles Daily Journal, 5/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.