California lawmakers pass bill to prevent insurers from dropping those who file costly claims
California lawmakers passed legislation Thursday designed to curb the practice of rescinding health insurance policies after a costly claim is made.
The measure aims to protect policyholders left holding the bag for medical care because of an inaccuracy in an application filed years ago.
Assembly Bill 2 split the Legislature largely along party lines, with most Republicans opposed. It targets medical coverage sold to individuals who do not receive employer-paid insurance policies.
Assemblyman Hector De La Torre, D-South Gate, said some providers have scoured old policies looking for any inaccuracy they could find to skip payment.
He cited an example involving a 4-year-old girl who was denied payment of $60,000 in bills for a tumor not diagnosed until months after her policy went into effect.
"Some health insurers and health plans in this state were paying their employees a commission based on the number of policies they were rescinding," said Assemblyman Dave Jones, D-Sacramento.
Gov. Arnold Schwarzenegger vetoed a similar bill last year but has taken no position on AB 2.
Opponents argue that AB 2 would increase health insurance costs by sparking litigation over broad or ambiguous wording in the bill.
"This is an overblown solution to a problem that doesn't exist to the degree that the authors would like us to believe," said Assemblyman Anthony Adams, R-Hesperia.
AB 2 would require:
- Individual health care service plans to be subject to an independent external review before denying or rescinding coverage.
- The state to establish standard information and health-history questions to be used on policy applications.
- That intentional misrepresentation be shown before an individual health care service plan can be rescinded.
Opponents contend that proving someone intentionally erred on an insurance application is an unreasonable burden. "I think fundamentally that it is not fair to ask the insurance company to prove what was in the mind of someone," Adams said.
Schwarzenegger has been critical of unfair rescission practices.
Two years ago, the state Department of Managed Health Care reached agreement with five providers requiring them to pay fines ranging from $50,000 to $10 million and to alter their practices, a legislative analysis of AB 2 said.
The settlement required that 3,300 people be offered reinstatement of coverage that had been rescinded, the analysis said.
In late 2008 and early 2009, the California Department of Insurance reached agreement with three providers under its jurisdiction, the analysis said.