Fighting rescissions

One of the casualties of last year’s budget fiasco in Sacramento was a bill that would have made it harder for health insurance companies to rescind coverage after a customer undergoes expensive treatment -- a noxious practice that Times reporter Lisa Girion has been chronicling for more than three years. In his 2008 State of the State address, Gov. Arnold Schwarzenegger had promised to halt abusive rescissions, then vetoed a measure by Assemblyman Hector De La Torre (D-South Gate) that would have allowed coverage to be terminated retroactively only for customers who lied on their applications about their medical history. Schwarzenegger’s veto message criticized lawmakers for not including some consumer safeguards he had proposed, but his action protected insurers, not policyholders.

The Assembly passed a new version of the De La Torre bill (AB 2) this week that addresses some of Schwarzenegger’s complaints, and we urge lawmakers to give the governor a chance to redeem himself. Insurance Commissioner Steve Poizner weighed in this week too, proposing rescission regulations for individual health insurance policies (that’s the portion of the market he oversees; the state Department of Managed Health Care regulates HMOs and other group plans). Poizner’s proposal would simplify health insurance application forms, prod insurers to evaluate applicants more carefully before agreeing to provide coverage, and bar rescissions based on inadvertent or innocent omissions. It’s a promising plan that could help more than 2 million Californians with individual policies, and Poizner should see it through without delay.

Still, these measures would merely treat the symptoms of a larger problem. Californians who don’t have access to group health insurance from their employers have no sure way to obtain coverage from private insurers unless they qualify medically for a special high-risk pool. That means insurers can stiff-arm people whose medical histories -- or their families’ -- portend a disease- or injury-riddled future. (One advocacy group, Consumer Watchdog of Santa Monica, estimates that up to 30% of the people who apply for individual policies get rejected.) Cracking down on bad-faith rescissions will help some people maintain their insurance, but others may just find out sooner that they can’t get coverage for the illnesses for which they’re most at risk, if they can get coverage at all.

The solution in the long run is for everyone to have health insurance. That way, the only question for insurers will be how much to charge their customers, not whether to grant coverage. There’s no consensus, however, on whether everyone in this country should be insured, let alone how that coverage would be provided or financed. And even if we were to establish a system of universal coverage, insurers may still insist on reviewing applicants’ medical histories in order to decide which type of coverage to offer. That’s why De La Torre’s bill and Poizner’s proposal are important steps in the process of overhauling healthcare in this country -- particularly the requirement for clear and standardized applications, the increased pressure on insurers to review applicants’ medical histories in advance, and the protections for consumers who inadvertently fail to disclose every jot and tittle of their medical histories.