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Insurance Cancellation Settlements Not Enough to Protect CA Patients

Schwarzenegger Must Keep His 'State of the State' Promise to Protect All Californians By Signing Legislation

LOS ANGELES, Sept. 12 /PRNewswire-USNewswire/ -- New legislation awaiting Governor Schwarzenegger's signature -- not settlements between health insurers and state regulators -- is needed to protect Californians from future cancellations of coverage when they get sick and need coverage the most, said Consumer Watchdog.

Today's settlement between the California Department of Insurance and Health Net over retroactive cancellation -- rescission -- of health insurance policies comes in the wake of four similar settlements reached by the Department of Managed Health Care and state HMOs. The settlements help people whose coverage was previously canceled but do not sufficiently protect current and future policyholders.

According to the Department of Insurance, "Health Net agreed to make significant changes to its application form, underwriting process, agent training, and . . . has agreed to establish an independent, third-party review process for future rescission decisions."

Consumer Watchdog said that though the settlement's offer of new coverage to canceled patients was good news, the essential missing element is a clarification of the legal standard for rescissions -- intentional misrepresentation, not an innocent omission.

"Nowhere in any of these settlements does it say that insurers must prove a patient intentionally misrepresented a past health condition before rescinding coverage. Independent review of an insurer's decision to cancel care will not help patients if the rule the reviewers follow is that innocent patients can be canceled. Independent review without a clear legal standard will lead to unfair and inconsistent results. It is particularly concerning that Health Net has 'admitted no wrongdoing' in the settlement and reserves the right to rescind coverage in the future. We need new law to clarify that canceling innocent patients is wrong," said Jerry Flanagan of Consumer Watchdog.

Read a letter Consumer Watchdog sent to Governor Schwarzenegger yesterday explaining why such settlements are insufficient to protect against future cancellations:

"In his State of the State address Governor Schwarzenegger promised that he would take action so that these devastating cancellations would 'not happen to any other Californian.' To keep that promise Governor Schwarzenegger must sign AB 1945," said Jerry Flanagan.

Watch an excerpt of this year's State of the State address in which Governor Schwarzenegger promised to protect Californians from retroactive insurance cancellations on You Tube:

Assembly Bill 1945 by Assemblyman Hector De La Torre (D-South Gate), which passed the legislature with bipartisan support, comes in response to widespread news coverage of insurers violating state law by using innocent omissions on an insurance application to cancel coverage after a patient falls ill.

The key element of Assembly Bill 1945 states that a patient's health coverage cannot be rescinded unless the patient intentionally misrepresented or intentionally omitted health information on his or her application for coverage. Health insurance companies strongly opposed the legislation.

Rescinding innocent patients helps insurance companies protect their profit margins by waiting until a patient files a claim to get rid of policyholders who might actually cost them money.

SOURCE Consumer Watchdog
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