California poised to pass tough anti-rescission bill

It looks like the state of California will pass a tough bill banning health plans from retroactively canceling consumer policies for alleged misstatements in their applications. The practice, known as rescission, has pitted the state's health plans against regulators in a years-long battle over what the law allows.

The new bill, which has been passed by the state Senate and is expected to pass the Assembly shortly, would set up an independent board that would have to approve any cancellation of beneficiaries' contracts. To get a cancellation, insurers would have to prove that the applicant intentionally misrepresented facts on their application. Right now, the insurer gets to decide whether the application is factual, and whether any errors were intentional.

The bill would also create a standard set of health history questions that all health plans doing business in the state would have to use in screening applicants. Health plans would have to complete their medical underwriting analysis of the contract before issuing a policy. In the past, some have not-so-coincidentally canceled policies once the member began to face large treatment costs.

The bill would take effect far more quickly than proposed health reform efforts demanding the end of medical underwriting entirely. Most health reform proposals call for a 2013 deadline, but this bill would take effect in January 2011. If it is approved by both houses, Gov. Arnold Schwarzenegger is expected to sign the measure.

To learn more about the bill:
- read this Health Leaders Media piece

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