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Andrew LaMar

Sacramento – An Assembly committee will question state officials Wednesday about settlements reached with insurers over the thousands of cases in which coverage for patients was cancelled once they got seriously ill and medical bills mounted.

The outrageous, industry-wide practice of rescission continues to this day, despite the settlements reached in 2008 and 2009 between insurance companies and two state agencies that oversee them, the Department of Insurance and the Department of Managed Health Care (DMHC).

According to an Assembly report made public today, only a "small fraction" of consumers covered by the legal settlements received benefits. Of the 3,366 covered by DMHC's settlements, only 92 – less than 3 percent – applied to recoup their medical expenses. In addition, insurers did not acknowledge any wrong-doing in the settlements, which essentially ended the state's investigations of rescissions, the report said.

"The state's rescission settlements have failed to compensate thousands of Californians who were wronged by insurers," said Brennan Cassidy, M.D., president of CMA. "This latest information underscores the need for legislation tightening the rules concerning rescissions and requiring an independent review of insurers' decisions to cancel coverage for patients."

CMA has sponsored AB 2470, by Assemblyman Hector De La Torre, D-South Gate. The bill would require independent approval of proposed rescissions before health insurers and health plans can cancel coverage for sick patients. A 2009 congressional investigation concluded that three insurers used rescissions to cancel more than 20,000 policies over five years, saving the companies $300 million in claims.

The legislation follows two other similar bills – AB 1945 and AB 2, both by De La Torre – that passed the Legislature but were vetoed by Gov. Arnold Schwarzenegger.

Wednesday's hearing is set for 9 a.m. in State Capitol Room 437 and will be conducted by the Assembly Committee on Accountability and Administrative Review. Those scheduled to appear include David Link, the deputy commissioner and legislative director of the California Department of Insurance, and Amy Dobberteen, the assistant deputy director of the Department of Managed Health Care's office of enforcement.

Read the committee's hearing agenda and background materials.