1,200 people to have canceled health-care coverage restored

Two of the state’s largest health plans agreed Thursday to reinstate nearly 1,200 patients whose health coverage the insurers dropped after the individuals incurred high medical expenses.

Under the deal, patients whose coverage was rescinded by Kaiser Permanete or Health Net since 2004 will be allowed to purchase new insurance regardless of preexisting medical conditions. The settlement, brokered by the California Department of Managed Health Care, comes three months after a Gardena hair salon owner won an unprecedented $9-million judgment against Health Net for canceling her coverage while she was in the midst of undergoing chemotherapy.

In its deal, Kaiser agreed to reinstate up to 1,092 former enrollees – all the people the managed-care insurer rescinded between the time it began the controversial practice in April 2004 and when it halted recissions in October 2006. A series of articles in The Times beginning in 2006 have highlighted the impact of health insurance recissions on patients, physicians and hospitals and the controversy surrounding them.

Kaiser agreed to pay a $300,000 fine to the state without admitting wrongdoing. It also agreed to make a number of changes to its application process, including developing a clearer insurance coverage questionnaire to minimize mistakes and omissions by applicants that often form the basis for rescissions.

If Kaiser fails to make the changes outlined in the settlement, its fine could rise to $3 million, officials said.

Health Net agreed to reinstate 85 former enrollees. The insurer, which halted rescissions after the $9-million judgment, also agreed to make changes to its enrollment process before resuming rescissions.

These “enrollees are clearly getting a win today,” said Cindy Ehnes, director of the Department of Managed Health Care. “It not only is the right thing to do but it follows the administration’s position that all Californians should have coverage regardless of their health status.

The settlement also sets up a process through which former enrollees can seek expedited review and repayment of medical expenses of up to $15,000.

Larger disputed medical bills and other types of damage claims could be submitted for arbitration resolution, officials said.

Once health plans offer to sell coverage to former enrollees, individuals will have three months to decide whether to purchase new coverage. Former enrollees may choose to buy insurance but also opt out of the settlement process, preferring instead to take their claims to court.

The deal comes a month after the DMHC threatened to order the state’s top five health plans to reinstate a total of 26 enrollees and to reopen every rescission carried out over the past four years in California for review.

Ehnes said her department was trying to reach similar deals with Anthem Blue Cross, Blue Shield and PacifiCare. Those settlement talks involve about 4,000 rescissions over the past four years.

“It means someone will not have to delay a necessary surgery due to the lack of insurance,” she said. “It means that someone will no longer have to contemplate bankruptcy because of an outstanding medical bill.”

 lisa.girion@latimes.com