The policy cancellations standoff--who wins?

Increasingly, it's looking like some major California health plans are settling in for a war with the state over cancellations of individual policies. Despite facing angry regulators--including the two with the most power over their industry, the Department of Managed Health Care and state Insurance Commissioner--the health plans aren't giving in.

All seem to be sticking to the position that they have the right to retroactively cancel policies when they ferret out even innocent misstatements or omissions on an individual coverage application. And of course, if they prevail, this position saves the plans some money. After all, canceling the policies held by, say, patients with active cancer will get them off the hook for some massive bills.

The thing is, I still can't imagine how they think they'll come out ahead here, given the massive costs involved in fighting this battle. What costs do I mean? Well, where do I start?

For one thing, they're antagonizing the bodies which more or less determine their fate on key matters. They're losing in the courts, at least one of which has said in no uncertain terms that their arguments are mush [1]. They're doubtlessly spending millions on legal fees. They're paying out multiple millions in fines [2], and from the looks of things, that's only going to get worse. Meanwhile, it doesn't exactly help their public image to be featured daily in newspapers which, fairly or not, are citing them as having left sick people to die over a few bucks.

Maybe their problems are much worse than the regulators even know--that they've been engaging in other practices which are even more susceptible of being challenged by agencies and judges--and they're just circling the wagons. Or maybe it's just plain hubris [3], or an entrenched corporate mindset on the subject. Honestly, it's impossible to tell from this chair. But I've got to say, if I were a regulator I'd be smelling blood at this point.

Whatever their motives, the health plans can't hold out forever--but governments have infinite patience. Honestly, health plan execs, what are you thinking? - Anne [4]