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Notice, Grace Period at Issue in Rescission Rules

California Insurance Commissioner Dave Jones filed a cross-appeal in the ongoing fight over how to implement California’s 2010 passage of AB 2470, authored by then-Assembly member Hector De La Torre (D-South Gate). The bill, approved by Gov. Arnold Schwarzenegger, banned rescission of consumers’ health coverage except in cases of non-payment or fraud.

The rules laid out by Commissioner Jones spelling out how insurers needed to comply with the law were challenged in court by the Association of Life & Health Insurance Companies in 2011. This year, on Feb. 1, the association filed an appeal of a decision by Sacramento Superior Court judge Michael Kenny, and on Feb. 25, the Commissioner announced his department filed a cross-appeal on two different aspects of the ruling.

Jones is appealing the judge’s decision to narrow the scope of the noticing requirement. Jones also is asking for a more-defined grace period before insurers can rescind coverage based on non-payment.

“If a policy is cancelled, there should be a grace period of notification,” said Janice Rocco, deputy commissioner of the Department of Insurance. In some cases, Rocco said, “an insurance carrier does an auto-transfer of [consumer] funds, then that carrier refunds the money and claims the person didn’t pay and are being cancelled for nonpayment. We feel that when insurers have billing errors, then the consumer shouldn’t suffer.”

Rocco said AB 2470 was a landmark piece of consumer protection law, and should stand in just the way regulators, in this case the Department of Insurance, intend. “Insurance carriers are trying to overturn portions of the law,” Rocco said. “This bill was for consumers.”

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