As you might have noticed, over the past several weeks there's been a lot of action in California over the issue of health plans retroactively canceling members' coverage. For example, the state's health plan regulator, the Department of Managed Health Care, has thrown everything it had at the plans it considers to be bad actors.
Among the hardest hit has been WellPoint, which has been forced to pay out tens of millions in settlements and fines (including a settlement with hospitals), but virtually all of the state's giants have been involved, including Health Net, PacifiCare and Kaiser Permanente. Many of the plans have been forced to reinstate hundreds or even thousands of beneficiaries, too.
The thing is, just how much have these sanctions accomplished? Sure, some policyholders have gotten their coverage back, and the giants will be shelling out some cash, but just how effective a deterrent is this? After all, we're talking multi-billion-dollar players here, so $1 million is an inconvenience and $10 million a rounding error for folks. Even more significantly, the plans aren't being required to admit any wrongdoing, so legally, they would seem to be shielded from facing a flood of lawsuits related to their actions. (Attorneys, I'd be interested to hear your opinion on this.)
The bottom line here, I think, is that if officials want to stop health plans from making improper policy cancellations, they're going to have to make it unprofitable for them to do this. While fines sound good, they'll never be large enough to be more than a mosquito bite for healthplans with billions in revenue. So someone has to try a new approach. Perhaps laws changing what kind of underwriting criteria they could use would be in the ballpark?
Anyway, now it's your turn. Readers, do you have any ideas about how to address the issue of policy cancellations? Do you think the state is taking the right approach? Do you share the view that these plans' actions are out of line? - Anne