New State Regulations Will Restrict Policy Cancellations

Department of Managed Health Care Director Cindy Ehnes is expected to announce regulations that will prohibit insurers from canceling individual policyholder's coverage unless the member intentionally lied on a medical questionnaire, the Los Angeles Times reports.

Applicants for an individual policy must apply for coverage by filling out a medical history questionnaire. Unlike group insurance, insurers can reject individual policyholders based on their medical history (Girion, Los Angeles Times, 11/14).

Under current state law, insurers say that it is legal to cancel a policy regardless of whether omissions on applications for coverage are intentional and that revoking coverage is a strategy used to address fraud.

DMHC and some consumer advocates disagree, saying that state law prohibits a policy from being cancelled for unintended mistakes (California Healthline, 10/19).

In response to a petition by the Foundation for Taxpayer and Consumer Rights, DMHC spokesperson Lynne Randolph on Monday said that Ehnes intends "to move forward with some kind of clarifying regulation" on cancellation standards for individual coverage.

FTCR's petition stated that the 1993 state law prohibits the cancellation of health insurance unless the insurer can prove "willful misrepresentation" (Los Angeles Times, 11/14).