Contact:
Andrew LaMar
916.444.5532

Sacramento – Legislation requiring an independent review of decisions by health plans and insurers to rescind coverage for patients passed the Assembly on a 46-24 vote today.

Assembly Bill 2, sponsored by the California Medical Association and authored by Assemblymember Hector De La Torre, D-Southgate, is designed to prevent the outrageous industry-wide practice of health plans wrongfully rescinding coverage for patients.

“Insurance companies rescind a policy only after patients get very sick and generate expensive medical bills. This insidious practice leaves the patient, doctor and hospital holding the bag while the insurer makes profits,” said Dr. Dev GnanaDev, CMA president. “Unfortunately, fines and lawsuits have not deterred such practices, and settlements amount to a slap on the wrist after the damage is already done. We need to stop health plans and insurers from leaving their patients stranded when they most need coverage.”

Under the measure, health care service plans would be subject to an independent external review before rescinding coverage. Consumers would keep their coverage until a decision is made.

The legislation would also raise the legal standard for rescission by stipulating that in order to cancel coverage, the health plan or insurer must have completed medical underwriting for the patient involved and show that the patient willfully misrepresented information. This provision would prevent consumers who make innocent mistakes, such as forgetting to include information about long-ago medical conditions, from losing their coverage.

In spite of a growing number of fines and lawsuits levied since 2006, HMO’s and insurers have blatantly continued the practice of denying coverage after the fact. The latest in a string of settlements came in January 2009. State regulators brokered a deal with Blue Shield of California, in which the insurer agreed to reissue medical coverage to nearly 700 Californians that the company dropped after becoming ill.

Without AB 2, consumers unjustly cut off from coverage needlessly suffer emotionally and financially. AB 2 remedies the problem by taking a proactive approach. Unlike other proposals by the Department of Insurance or the Department of Managed Health Care, this bill would cover all health plans and insurers, not just those regulated by either Department. The legislation moves next to the Senate.

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The California Medical Association represents more than 35,000 physicians in all modes of practice and specialties. CMA is dedicated to the health of all patients in California.