California considers regs to reduce policy rescissions

Regulators in California have proposed new regulations intended to defeat the health plan industry's practice of canceling policies retroactively over inadvertent application errors. If enacted, these rules could signal the end of a struggle over such cancellations, which has locked the state's health insurance industry in a battle with regulators and the court.

The draft regulations, which come from state insurance commissioner Steve Poizner, would require health plans to write coverage in simple English, and allow applicants to answer "not sure" in response to questions about preexisting medical conditions. The rules would also forbid insurers to drop someone if the plan didn't thoroughly investigate the applicant's medical history prior to issuing a policy.

On top of all that, the rules would bar cancellations if the patient was unaware of the medical information the application requested, or failed to understand the information's significance.

Meanwhile, the state Assembly should soon vote on a bill that would make rescissions difficult to justify for individual insurance of all types. It, too, would demand that applications be simple, and would bar cancellations, unless insurers could prove that an applicant purposely misled the company.

To learn more about the new regs:
- read this Los Angeles Times piece

Related Articles:
PacifiCare restores canceled policies
Health Net fined $1M for non-disclosure of cancellation bonuses
BC of California fined $1M for cancellations
Health plan industry addressing policy cancellations