Bonuses for cutting coverage is banned

Times Staff Writer

Gov. Arnold Schwarzenegger signed into law Tuesday a ban against health insurance companies rewarding employees with bonuses for canceling or limiting a patient’s coverage.

The law is one piece of legislative, regulatory and law enforcement efforts to curtail the practice that the industry has defended as a little-used guard against fraud that helps control costs.

Assemblyman Ted Lieu (D-Torrance) introduced AB 1150 after The Times disclosed that Woodland Hills insurer Health Net paid bonuses to an employee in charge of canceling coverage based in some years partly on how many policies she canceled.


In other years, the bonus was based in part on the savings associated with such cancellations.

Critics contend that insurers use confusing applications for individual policies to trap people into making mistakes that can later be used against them. When a policyholder gets sick, they say, insurers scour old medical records looking for an undisclosed condition or symptom to use to justify cancellation.

Schwarzenegger said the new law was a step in the right direction.

“Until we achieve comprehensive healthcare reform, stopping unfair healthcare rescissions is an urgently needed consumer protection,” Schwarzenegger said. “This terrible practice further illustrates the erosion of our healthcare system and the need for comprehensive healthcare reform.

“Today we are standing up for consumers by putting an end to a deplorable practice, and I will continue working with my partners in the Legislature to stop unfair healthcare rescissions once and for all.”

Lieu said he was pleased that Schwarzenegger signed the bill.

“The healthcare crisis has left millions of Californians without health insurance or access to medical care,” he said. “Patients should not have to worry about losing their health insurance -- simply because an employee can make some extra bonus money.”

Last week, the administration’s Department of Managed Health Care fined insurers Anthem Blue Cross and Blue Shield a total of $13 million over rescission practices.

As a part of a negotiated settlement, the two companies agreed to offer new coverage to 2,220 Californians whose health plans were rescinded.