Healthcare policies to be restored
Two of the state’s largest health plans agreed Thursday to reinstate coverage to nearly 1,200 patients whose policies were dropped after they incurred high medical expenses.
Under the deal, patients whose insurance was rescinded by Kaiser Permanente or Health Net since 2004 will be allowed to purchase new insurance regardless of preexisting medical conditions.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 undergoing chemotherapy, halting her treatment.
Gov. Arnold Schwarzenegger called the settlement groundbreaking.
“This important settlement should pave the way to similar agreements with other health plans to reinstate health coverage,” he said. “Patients should not live in fear of losing their healthcare coverage when they need it most.”
The state is trying to reach similar deals with Anthem Blue Cross, Blue Shield and PacifiCare involving about 4,000 rescissions.
Insurance rescissions affect people with individual coverage, which is sold and priced based on an applicant’s medical history. Insurers say some enrollees lie on applications in order to gain coverage and that rescinding policies from those who hide preexisting conditions prevents premiums from going up for everyone.
But regulators and law enforcement officials allege that insurers do little to verify applications before issuing coverage and then wait to see what happens. When patients incur substantial medical claims, insurers go back and scour applications for omissions, even innocent ones, in order to rescind their coverage, critics say.
About 2.6 million of the 28 million Californians with health coverage have individual plans.
Kaiser spokesman Mike Lassiter said the insurer proposed the deal to reinstate up to 1,092 former enrollees -- all those whose coverage the health maintenance organization dropped between the time it began the controversial practice in April 2004 and when it halted rescissions in October 2006.
Kaiser agreed to pay a $300,000 fine to the state without admitting wrongdoing. It also agreed to make a number of procedural changes, including developing simpler coverage applications to avoid applicant mistakes that often form the basis for rescissions.
“We want to clear up past issues so we can move forward toward a longer-term solution addressing the larger issues of affordable healthcare coverage,” said Jerry Fleming, senior vice president of Kaiser Permanente.
In a similar deal, Health Net agreed to reinstate 85 former enrollees.
In a statement, the insurer said, “Health Net today announced that it will offer coverage to all 85 HMO customers who have been rescinded since 2004 and will work as expeditiously as possible with these individuals to resolve their eligible out-of-pocket costs.”
Jane Macauley, a Sacramento mother of five who was rescinded by Kaiser two years ago on the eve of a scheduled hernia operation, said she was surprised by the deal.
“I didn’t get the surgery,” she said Thursday. “I wrote two letters expressing my belief that it was very unfair that I was canceled. But they basically just said, ‘You are out of luck.’ ”
These “enrollees are clearly getting a win today,” said Cindy Ehnes, director of the Department of Managed Health Care. The settlement creates a process through which former enrollees can seek repayment of medical expenses of up to $15,000. Larger and disputed medical bills and other types of claims would be submitted to an arbiter selected by the department and the health plans.
Former enrollees may choose to buy insurance but also opt out of the settlement process, preferring instead to take their claims to court.
“We believe our voluntary ‘Kaiser Permanente Fresh Start Program’ for previously rescinded members is the quickest way to give people what they really need -- health insurance,” said Fleming of Kaiser. “The issue of whether people either intentionally or unintentionally gave inaccurate information on their coverage application is set aside for the purposes of getting a fresh start on their coverage.”
The deal comes a month after Ehnes threatened to order the state’s top five health plans to reinstate more than two dozen enrollees and to reopen every rescission carried out over the past four years in California for review.
Reinstatement “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.”
In addition to the state’s regulatory scrutiny, Los Angeles City Atty. Rocky Delgadillo has sued Health Net and Blue Cross over allegedly illegal rescission practices.
Health Net also is the target of a criminal investigation by the city attorney related to rescissions. Chief Assistant City Atty. Jeffrey Isaacs said Health Net’s latest deal with the department would not affect its suit or criminal investigation.
The city attorney’s office issued subpoenas to the department Wednesday seeking information related to rescissions.
DMHC spokeswoman Lynne Randolph said the department would “cooperate to the extent that we are able.”
Some consumer advocates were disappointed with the deal, saying portions of it appeared designed to help insurers contain their legal liability.
William Shernoff, a Claremont lawyer who represents hundreds of people whose policies have been rescinded, said he would tell clients to “accept the reinstatements because that’s wonderful to get the medical care -- that is important.”
But, he added, “as far as damages for past harm, there’s no doubt in my mind that the best place for them to get their full damages will be in court rather than in an arbitration process.”
Jerry Flanagan, a spokesman for Consumer Watchdog in Santa Monica, said the deal was no substitute for regulations promised 18 months ago that the department put on hold pending legislation.
“Punting this issue to the Legislature where insurers have immense lobbying power risks regulation that is more loophole than protection,” he said.
Anthony Wright, executive director of Health Access California, a statewide healthcare consumer advocacy coalition, said the department needed to enforce the settlement and adopt a “ ‘zero-tolerance’ policy for further bad behavior.”
“It’s sad that after all the attention on this reprehensible practice, we don’t have the entire industry in agreement yet,” he said.