Health bill heads to governor

The California Legislature passed a measure Tuesday that would curtail the ability of insurance companies to cancel coverage for patients diagnosed with serious illnesses.

The bill addresses a practice known as rescission, which was the subject of a series of articles in The Times exposing how several major healthcare companies, including Blue Cross and Health Net Inc., canceled medical coverage for sick policyholders.

The practice has since been the subject of probes by law enforcement agencies in California and sparked congressional hearings. Government officials say thousands of policyholders in California have had their coverage dropped.

“The insurance industry has made billions by unfairly canceling health policies, with little to no oversight before rescinding a patient’s insurance coverage,” said Assemblyman Hector De La Torre (D-South Gate), author of the measure, AB 2. He said the bill “protects consumers and will put an end to this shameful practice.”

The proposal, pushed by the California Medical Assn. and other advocacy groups, would allow regulators to block the rescission of coverage unless they find that a patient intentionally lied to the company about preexisting conditions.

It also would clarify for consumers what information they must provide to insurance companies when they apply for coverage, and simplify the forms on which patients report the information. And it would require the companies to complete a check of a patient’s health history before approving their coverage.

The measure, approved by both houses of the Legislature, will go to Gov. Arnold Schwarzenegger once the Assembly approves minor changes. But as lawmakers acted on the health insurance issue and dozens of other matters Tuesday, the governor vowed to stop signing bills until further notice.

He rebuked legislators for failing to make progress on the state’s water needs and its prison overcrowding crisis, as well as for refusing to act on confirmation of several of his key appointments. His staff announced that he would not sign any bills absent progress on those issues.

“These issues have been debated for up to five years,” said Rachel Cameron, a spokeswoman for the governor. “It’s time for action.”

The threat drew angry retorts from the Assembly floor.

“You’re not the emperor or king,” said Assemblyman Alberto Torrico (D-Newark). “Do not call us out, governor. . . . Do your job.”

Schwarzenegger has not taken a public position on the health insurance measure, but last year he vetoed a similar bill. The California Chamber of Commerce opposes the current measure, saying it would lead to more litigation and higher costs for health plans and insurers.

“Any of those who have read the various exposes in the Los Angeles Times and others . . . is aware that health insurers have admitted and acknowledged they engaged in a form of post-claims underwriting,” said Sen. Mark Wyland (R-Escondido). “It is unethical and, considering what some of these people have endured, it really borders on the immoral.”

However, Wyland said he would not vote for the bill because the Department of Insurance has proposed new rules to solve the problem, and he wants to see how they work.

An investigation released in June by the U.S. House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people nationwide, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period. It also found that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses.

Action was also taken on a flurry of other bills Tuesday.

* A prohibition on loan modification consultants charging advance fees to borrowers got final approval from the Senate. Sen. Ron Calderon (D-Montebello), author of the bill, SB 94, called it his “response to a cottage industry that has sprung up to exploit borrowers who are having trouble affording their mortgages.”

* Lawmakers approved a measure, supported by organized labor, that would require cities and counties to get approval from a commission before declaring bankruptcy. Opponents said the bill, SB 88 by Sen. Mark DeSaulnier (D-Concord), would make it more difficult for municipalities to scuttle public-employee union contracts by declaring bankruptcy. Local government officials said it would handcuff financially strained cities and counties; union contracts typically are as much as 75% of their costs.

* Lawmakers passed a measure to prevent paparazzi from taking unauthorized photos of people including celebrities or their children in “personal or familial activity,” creating a fine of up to $50,000. AB 524 is by Assemblywoman Karen Bass (D-Los Angeles).

* Local powerhouse Philip Anschutz would benefit from a proposal to waive state prohibitions on alcohol advertisements in a venue he owns: Club Nokia. Under the bill, alcohol makers whose products are sold at Club Nokia in Los Angeles could buy indoor advertising in the venue. State law prohibits paid advertising by winegrowers, beer makers and distilled spirit producers where a retail license holder also owns a sports or entertainment venue.

The bill, AB 813 by Assemblyman John Perez (D-Los Angeles) was sponsored by AEG, which Anschutz owns. AEG built the club and owns nearby Staples Center. Bypassing the normal legislative process, Perez stripped the contents from a bill related to gambling and already approved in the Assembly, and replaced it with the language that helps Anschutz. The Senate is expected to take it up by Friday, the last day of the legislative year.

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patrick.mcgreevy @latimes.com

eric.bailey@latimes.com

Times staff writers Shane Goldmacher and Evan Halper contributed to this report.