A CALIFORNIA STATE ASSEMBLYMAN introduced legislation last month requiring insurers to seek approval from a state agency before canceling a policy. Just days later, Los Angeles’ city attorney filed a suit against Health Net Inc., a health plan with about 100,000 covered lives in the state.
Those steps in California reflect increasing attention being paid to healthcare insurers nationwide.
The legislation introduced in the state’s assembly by Hector De La Torre came days after the state's Blue Cross plan sent letters to physicians seeking their help in identifying newly insured patients who had not reported pre-existing conditions. The letters sparked a firestorm of negative publicity.
De La Torre introduced the bill, AB 1945, seeking to amend a section of the state's health and safety code and a portion of the insurance code. Existing state law prohibits a healthcare service plan or health insurer from "engaging in postclaims underwriting, defined to mean the rescinding, canceling or limiting of a plan contract" because the plan failed to resolve all questions before the coverage went into effect.
The amendment would also require healthcare service plans or insurers to "seek and obtain final approval of its regulator prior to rescinding, canceling or limiting a plan contract or policy."
The bill would enable regulators to suspend or revoke the license or certificate of a plan or insurer that violates the provision and assess administrative penalties.
According to local news reports, De La Torre criticized the letters sent by Blue Cross of California and said the bill would protect state residents from unfair practices of insurance companies.
The Blue Cross letters reportedly asked physicians to review healthcare coverage applications to determine whether a new member had not disclosed pre-existing conditions or previous requests for healthcare services. The insurer said it had sent the letters for several years but would stop sending them to physicians.
In Los Angeles, City Attorney Rocky Delgadillo has filed a civil law enforcement action against Los Angeles-based Health Net Inc. and two of its subsidiaries for engaging in unlawful and deceptive business practices.
Delgadillo says the insurer's practices caused it to deny or delay the authorization of claims, or resulted in the cancelation of coverage after it initially issued a policy.
Health Net executives denied the charges and said the company has taken steps in past years to improve its cancelation practices.
Delgadillo also announced a criminal investigation of individuals associated with Health Net's illegal bonus payment program for policy cancelations, in violation of the state's Know-Keene Act, and other individuals who may have made false statements to the state's department of managed health care regarding the bonus plan.
Health Net officials said they had already acted to drop the bonus payment program.
The complaint said Health Net purposefully used false and misleading marketing in efforts to gain more members. It contends applications asked prospective members for their medical histories and were accepted by the insurer without investigation of those histories.
"Then, only after policy holders submitted claims for medical services did Health Net retroactively conduct investigations into their medical history in order to find discrepancies in the application to allow for a delay in payment or cancelation of coverage," Delgadillo said. "This practice of post-claims policy cancelation is unlawful, unfair and fraudulent."
Last month, the city attorney's office launched a prosecutor-sponsored Web site, www.ProtectingTheInsured.org to collect information from consumers, physicians and hospitals as part of an ongoing investigation into health insurance companies.