California's policy-cancellation war

This year the California health insurance industry fought an entrenched battle with regulators over the right to cancel individual policies--even retroactively--whenever they saw fit. The regulators fought back, imposing million-dollar fines on WellPoint [1] and Blue Shield of California [2]. Still, officially the plans remain recalcitrant, with most insisting that the cancellations they've imposed were well within their rights.

Despite health plan protests, about 3,400 Californians got invitations to rejoin their health plans [3], some whose rescissions had occurred in previous years, including policyholders with Health Net, Anthem Blue Cross of California, Kaiser Permanente and PacifiCare.

But Governor Schwarzenegger (R) made it harder for California's Department of Managed Health Care to fight these rescissions by vetoing a bill that would have cracked down on the practice [4]. California law makes it illegal to cancel a policy unless the insurance company can prove that the policyholder lied on the application, and the bill would have created an independent review process for each case of rescission.

With health plans mounting do-or-die defenses despite fines and adverse court rulings, the Department of Managed Care issuing spankings on all sides and the governor shooting new regs down, it's a real mess. We're in this one for the long haul, people.