Few Californians benefiting from rescission settlements

Only a small fraction of eligible Californians have benefited from agreements that Anthem Blue Cross and other insurers made to settle accusations that they systematically and illegally dropped sick policyholders to avoid paying for their care, a report due out Wednesday finds.

In settlements with the state Department of Managed Health Care and the Department of Insurance, California’s largest health insurance companies agreed to offer new coverage to nearly 6,000 people they dropped after they were diagnosed with cancer and other serious conditions.

More than a year later, fewer than 300 people have obtained new health insurance from their former insurer under the terms of those settlements, according to a report prepared for the state Assembly Committee on Accountability and Administrative Review.

The report was prepared by Bryan Liang, director of the Institute of Health Law Studies at the California Western School of Law, and based on data from the regulators. It concluded that so few eligible consumers obtained new coverage because the settlements were too complicated and because the cost of the new coverage was too high.


The report, to be discussed at a committee hearing, also found that corrective action plans that regulators required of the insurers have not been fully implemented.

Committee chair Hector De La Torre (D-South Gate) said the results were “pretty pathetic when you are talking about thousands” of policies that were rescinded.

But a spokesman for Insurance Commissioner Steve Poizner took issue with how the report measured success.

“The metrics used to evaluate the agreements are totally inappropriate,” said insurance department spokesman Darrel Ng.


“There are a number of very plausible reasons why consumers would not have elected to participate in the settlement, including finding coverage through work.”

Ng said the department had no plans to evaluate the settlements on those terms because such an endeavor would be too costly and time-consuming.

Department of Managed Health Care spokeswoman Lynne Randolph said that agency’s efforts to stem illegal policy rescissions worked.

“The DMHC settlements were the first and strongest in the nation to halt health plan abuses,” Randolph said. “As a result of DMHC actions, the number of rescissions industrywide has decreased significantly since 2005, millions of dollars have been assessed against health plans, thousands of consumers have been offered an opportunity to obtain coverage and reimbursement, and reforms have changed the practice of rescissions industrywide. It is difficult to know why many consumers chose not to participate.”