California Health Insurers To Reinstate Coverage For 1200 People

Armen Hareyan's picture

California health insurers Kaiser Permanente and Health Net on Thursday agreed to reinstatecoverage to about 1,200 individuals whose policies were improperly rescinded,the San Francisco Chronicle reports. The insurers reached theagreement with the California Department ofManaged Health Care,which has been investigating insurers that retroactively cancel health coveragefor some plan members who incur high medical costs (Colliver, SanFrancisco Chronicle, 5/16). Under state law, health insurers can legallyrescind coverage if it is determined that a member intentionally lied orwithheld information on an application. However, insurers have been accused ofimproperly canceling coverage after a person gets sick, citing minor orinadvertent mistakes on applications (KaiserDaily Health Policy Report, 4/18).

Kaiser has agreed to reinstate policies for 1,092 members whose coverage wasrescinded between 2004 and 2006, when the company ended the practice. HealthNet has agreed to do the same for 85 members whose policies were dropped. Bothinsurers also must pay a $300,000 fine (Perkes, Orange County Register, 5/15). DMHC is pursuing similarsettlements with PacifiCare, Blue Shield of California and Anthem Blue Cross to reinstate about 4,000 other rescissions.

According to the Los Angeles Times, the agreements come about threemonths after a state resident with cancer won a $9 million lawsuit againstHealth Net for rescinding her coverage while she was undergoing chemotherapy,which halted her treatment. In addition, DMHC Director Cindy Ehnes last monththreatened to order the state's top five health insurers to immediatelyreinstate coverage for more than two dozen individuals and to review all casesof policy rescissions since 2004 (Girion, Los Angeles Times,5/16).

Kaiser officials said that in the coming weeks, the company will begincontacting former members who have unresolved disputes and offer them theoption of purchasing individual coverage without a medical review (Glover, Sacramento Bee, 5/16). The Kaiser agreement alsoestablishes a process through which former plan members can seek reimbursementfor medical expenses up to $15,000. Larger and disputed bills and other typesof claims will be submitted to an arbitrator selected by DMHC and the healthinsurers, the Times reports. Former members also could opt out ofthe settlement and take their claims to court (Los Angeles Times,5/16). Health Net agreed to the same terms, but the settlement is not yet final(San Francisco Chronicle, 5/16).



Jerry Fleming, senior vicepresident and national health plan manager for Kaiser, said, "This programwill provide those persons with the option to purchase individual healthinsurance coverage going forward and provide a fair and expeditious process toresolve any disputes that may remain," adding, "We want to clear uppast issues so we can move forward toward a longer-term solution addressing thelarger issues of affordable health care coverage" (Sacramento Bee,5/16).

Ehnes said, "Our goal is to get all consumers, not only those withinKaiser, covered again without having to go through a long process that may notbe decided in their favor" (San Francisco Chronicle, 5/16).

California Gov. Arnold Schwarzenegger (R) said, "This important settlementshould pave the way to similar agreements with other health plans to reinstatehealth coverage. Patients should not live in fear of losing their health carecoverage when they need it most."

William Shernoff, an attorney representing hundreds of members whose coveragewas dropped, said he would advise his clients to "accept thereinstatements because that's wonderful to get the medical care -- that isimportant," adding that "as far as damages for past harm, there's nodoubt in my mind that the best place for them to get their full damages will bein court rather than in an arbitration process" (Los Angeles Times,5/16).

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