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Consumer Watchdog Praises Insurance Commissioner Poizner for Health Insurance 'Rescission' Rules, Pans Schwarzenegger Administration for Failure to Regulate HMOs

Without Parallel Rules in Dept. of Managed Health Care, Insurers Can "Discriminate...On the Basis of Which Agency Regulates" the Policy.

LOS ANGELES, June 3 /PRNewswire-USNewswire/ -- At a press conference today in Los Angeles, Consumer Watchdog joined California Insurance Commissioner Steve Poizner to praise new rules proposed by the Department of Insurance to protect patients from health insurance cancellations when they get sick. The group called on Governor Schwarzenegger's Department of Managed Health Care (DMHC), which oversees a far larger share of the state's HMOs and health insurers, to move forward with similar rules now more than 18 months overdue.

Today's announcement by Poizner comes following several years of media attention to the issue of health policy contract "rescission," or retroactive cancellations of coverage after a patient becomes sick with an expensive-to-treat illness. Thousands of California families have been left uninsured through no fault of their own while in the course of medical care, often put in jeopardy of medical bankruptcy and forced to rely on limited public health programs.

The draft rules proposed today by the Department of Insurance bar a cancellation if the insurance company failed to investigate a patient's health history before issuing a policy and if the patient was unaware of the medical information being sought on the application or failed to appreciate its significance.

"The rules proposed by the Department of Insurance go a long way to protect innocent patients from losing their coverage when they are sick and need it most," said Jerry Flanagan of Consumer Watchdog. "The Schwarzenegger Administration must also follow through with its planned rules applying to HMOs and PPOs, which are separately overseen by the Department of Managed Health Care. Without such rules, health insurers will be able to discriminate against patients on the basis of which agency regulates their insurer."

In a letter today to DMHC Director Cindy Ehnes, Consumer Watchdog called on the regulator to immediately revive the stalled rules. In the letter, Consumer Watchdog wrote:

"It has been over two years since the [DMHC] granted Consumer Watchdog's rulemaking petition...However, the Department has yet to issue a final rule and since this proceeding is no longer listed as pending on the Department's website, it appears that the Department has ceased the rulemaking proceeding altogether.

"Rescission continues to be the most pernicious of the health plan industry's practices, leaving innocent patients uninsured after they get sick and need coverage the most...It is very important that the Department revive this rulemaking now as the Department of Insurance announces its own rulemaking today. Ideally, both agencies will work together to establish a coherent regulatory approach that is protective of patients."

Download the letter to the DMHC here:

Download the attachments to the letter here:

Consumer Watchdog petitioned for the overdue DMHC regulations on November 13, 2006. The DMHC granted the petition and acknowledged it was pursuing regulations on December 13, 2006. Under the state's Administrative Procedures Act, regulations are usually enacted within nine months of their announcement.

"The administration's quiet failure to follow through on its promised rules betrayed patients who were medically harmed and forced deep into debt by the illegal cancellation of their health insurance policies," said Flanagan. "Heavy lobbying and empty promises by insurance companies are not sufficient reason to abandon protection of the most vulnerable patients."

The DMHC is responsible for regulating Health Maintenance Organizations (HMOs) and some Preferred Provider Organizations (PPOs) which provide health care to approximately 22 million Californians. The director of the DMHC is appointed by the governor. The Department of Insurance regulates some PPOs and traditional indemnity health insurance which provide health care to approximately 5 million people. The commissioner of the Department of Insurance is elected.

Consumer Watchdog is a non-profit and non-partisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, California. For more information, visit us on the web at:

SOURCE Consumer Watchdog
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