Calif. Lawmaker Won’t Cede Health Insurance Rescissions Fight

By | October 15, 2009

A California assemblyman said Tuesday he’ll try a third time to get strict measures on when health insurance companies can cancel policies approved into law.

Gov. Arnold Schwarzenegger on Sunday vetoed a bill backed by Assemblyman Hector De La Torre. The governor said the measure would have benefited trial lawyers, rather than consumers. It was the second time he had vetoed the proposal.

Insurers can legally drop a policy if a policyholder is found to have lied on their application about pre-existing conditions. But consumer advocates have warned that health plans have repeatedly used irrelevant omissions or mistakes on applications to deny coverage in cancer cases and other expensive areas of care.

The bill was prompted largely by a series of stories in the Los Angeles Times that reported, among other things, that Blue Cross employees were given incentives to find ways to rescind coverage for people making large claims.

De La Torre, D-South Gate, said his bill would have required that health insurance companies show a policyholder intentionally withheld information before dropping them from coverage. Insurers also would have been responsible for researching applications before issuing policies.

Currently, insurance companies are the judge and jury on whether a policy should be canceled, De La Torre said.

“That’s wrong,” he said.

The bill would have reduced litigation by clarifying standards and establishing an independent review board, De La Torre said. It would have required companies to continue offering care and coverage to patients while their cases are under review.

The bill would have caused more upfront denials of coverage because it placed a very high legal standard on insurers, Deputy Legislative Secretary Jennifer Kent said.

Schwarzenegger’s veto message noted his approval of other measures to curb the practice of canceling health insurance policies, known as rescission. That includes a bill that prohibits health plans from rescinding a contract after two years, he said.

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