WASHINGTON – Five major California-based payers have settled with the Department of Managed Health Care, the state’s health insurance regulator, over illegal rescissions, but the issue of canceling individual policies and rendering consumers responsible for their medical bills is just heating up.
The practice of post-claims underwriting is being scrutinized not only on the state level, but on the federal level as well.
A July hearing of the House Oversight and Government Reform Committee on illegal rescissions has prompted Chairman Henry Waxman (D-Calif.) to open an investigation. He is expected to send information requests to some insurers.
A number of stakeholders have already reached out to him, including Consumer Watchdog, a consumer advocacy group, and Los Angeles City Attorney Rocky Delgadillo.
Nick Velasquez, a spokesman for Office of the City Attorney Los Angeles, said Delgadillo has spoken with Waxman. “We are willing to provide any assistance they need,” he said. “We feel very strongly against the unconscionable practice of canceling policies and intentionally using misleading applications.”
Anthem Blue Cross, a subsidiary of WellPoint, settled with the DMHC in mid-July.
“This resolution allows us to continue to build stronger working relationships with the DMHC, and we look forward to coming together in a more collaborative way to address the healthcare needs of Californians," Spokesman Jim Kappel said.
In mid-May, Health Net settled its $9 million judgment by the DMHC and agreed to reinstate members whose policies were canceled. “Health Net does not engage in the process of post-claims underwriting,” said spokeswoman Margita Thompson. “We will not rescind until we implement third-party review.”
Health Net has not heard from Waxman’s office, but Thompson said the health plan will cooperate.
PacifiCare of California, which is owned by UnitedHealth Group, settled with the DMHC in mid-June. “UnitedHealthcare’s individual line of business complies with all applicable state regulations and mandates regarding rescissions,” said Ellen Laden, director of public relations for Golden Rule Insurance Company, which underwrites and administers UnitedHealthcare plans for individuals and families.
“No one is dropped from coverage because of illness and no one receives a premium increase because of their individual claims history,” she said.
Velasquez disputed some health plans’ assertions that they are weeding out fraud, saying documents should be reviewed at the point of underwriting or qualifying stage.
He said Delgadillo’s office has “serious concerns” with the settlements, including the lack of admission of wrongdoing by the health plans.
Delgadillo called the settlements a “raw deal” for Californians “courtesy of the DMHC.” His office has accused the DMHC, a state agency, of “not aggressively pursuing those health plans engaging in illegal conduct,” Velasquez said.
Although applauding the offering of new coverage without medical underwriting going forward for members whose coverage was rescinded, Consumer Watchdog is dissatisfied with the settlements’ arbitration process for the members, said Jerry Flanagan, healthcare policy director. “The burden is on the patient to prove past care was a medical necessity,” he said.
A side issue, although important, is the charge that the DMHC is bowing to pressure from the health plans and not being more aggressive in its regulatory oversight of the rescission problem. In March, California State Senator Sheila Kuehl (D-Los Angeles) held a special legislative hearing by the Senate Health Committee on consumer protections regarding the DMHC’s lack of action in protecting consumers from rescission, cancellation and post-claims underwriting.
Post-hearing, a number of bills made its way through the California legislature. California Assembly Member Ted Lieu (D-Torrance) authored AB 1150, which was signed by Gov. Arnold Schwarzenegger and bans health insurance companies from rewarding their employees for canceling or limiting a patient’s health insurance.
Lieu has yet to be asked to participate in Chairman Waxman’s investigation, said spokesman Dan Okenfuss.
If the Congressional investigation discovers new information on California-based health plans, Okenfuss said Lieu would likely call for another statewide investigation.
Robert Zirkelbach, senior manager of media relations for America’s Health Insurance Plans, disputed Waxman’s assertion that the illegal rescission problem may be more widespread. He noted that while there is a discrepancy over how many individual policies are impacted, AHIP’s survey of the individual health insurance market showed that .15 percent of policies were rescinded in only the first two years.
Spokeswoman Cynthia Michener said Aetna, which launched individual products in 2005, has not been contacted by Waxman. “Rescissions are an infrequent occurrence at Aetna, amounting to less than 0.03 percent of accepted individual policies,” she said.
The latest development in legislative activity on rescissions is AB 1945, Assembly Member Hector De La Torre’s (D-South Gate) bill that requires health plans to get regulatory approval before rescinding a policy, as well as third-party review of rescission cases and approval by the Director of the DMHC and the Commissioner of the California Department of Insurance to establish a single or standard application form for individual coverage.
The California State Senate was expected to vote on AB 1945 the week of August 18.