State Unveils New Regulations on Health Plan Cancellations
On Tuesday, the Department of Managed Health Care and Department of Insurance proposed new regulations aimed at preventing insurers from improperly canceling individual health insurance policies, the Sacramento Bee reports (Chan, Sacramento Bee, 10/24). The move is the first time that the two agencies have acted together on any regulations.
The agencies said the new rules reinforce existing laws forbidding insurers from rescinding coverage unless they can prove that policyholders intentionally omitted information or lied on a medical questionnaire (Girion, Los Angeles Times, 10/24).
The regulations propose that:
- Advance notice be required before any policy cancellations;
- Coverage could not be suspended during an investigation of a policyholder;
- Coverage could not be canceled for an entire group if only one person is responsible for submitting false information on a medical questionnaire;
- The DMHC director could review policy cancellations (Sacramento Bee, 10/24); and
- Insurers simplify their applications to avoid confusing questions about medical history (Colliver, San Francisco Chronicle, 10/24).
The proposal will be reviewed during a public hearing sometime after mid-November (Sacramento Bee, 10/24).
State regulators began seeking new regulations following a petition by the Foundation for Taxpayer and Consumer Rights. The group demanded that the rules require an independent review by the department before a health plan could cancel an individual policy (California Healthline, 9/4).
However, Jerry Flanagan, spokesperson for the foundation, argued that the new regulations "will result in more litigation because patients will be forced to go to court when regulators fail to prevent illegal cancellations of coverage" (Sacramento Bee, 10/24).
Flanagan added that the rules "leave it up to the [insurers] to investigate, and the insurance company has a financial incentive to deny as many people as possible."
DMHC has fined Blue Cross of California and Kaiser Permanente for improper cancellations, and the agency is continuing investigations of Blue Shield of California, Health Net, Kaiser and PacifiCare (San Francisco Chronicle, 10/24).