A California state assemblyman has introduced legislation requiring insurers to seek approval from a state agency before they can cancel the policy of a covered life.
The action, introduced 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, last week, 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.
Local news reports quoted De La Torre as criticizing the letters sent by Blue Cross of California and saying 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. The local press said Blue Cross decided last week to stop sending the letters to physicians.