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2 California insurers agree to cover members with rescinded policies

More plans are expected to join the agreement with state regulators.

By Emily Berry — Posted June 2, 2008

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Kaiser Permanente and Health Net have agreed to offer coverage to hundreds of individuals whose policies the insurers had rescinded and to pay medical bills from before and after the rescissions.

The agreements between the state's Dept. of Managed Health Care and the insurers are the latest development in a crackdown on what authorities have called illegal policy rescissions.

"While it's obviously terrific for those particular patients, that this had to be done reflects that there is a pattern and practice of behavior from those big insurance companies, and it hurts people who need health care," said California Medical Assn. President Richard Frankenstein, MD, a pulmonologist from Garden Grove.

Dept. of Managed Health Care Director Cindy Ehnes said she expected the state's two largest insurers of individuals, Blue Cross of California and Blue Shield of California, to follow Kaiser and Health Net by agreeing to offer coverage to as many as 4,000 former members.

At a May 15 news conference announcing agreements with Kaiser and Health Net, Ehnes said doctors or hospitals who provided free or uncompensated care to the people regaining coverage have a right to collect from the health plans, but doctors and hospitals may have to go to the patient to ask for payment.

"The patient is going to be the first venue to be approached for identifying what expenses have been incurred during that period," she said. "We think that is the most reasonable way to proceed, because that individual has every reason to identify all aspects of damages [that] occurred as a result of the rescission."

The furor over health insurance rescissions is far from over, however. Legislation limiting rescissions is pending in the state assembly. Los Angeles City Attorney Rocky Delgadillo has sued Health Net over rescissions. Doctors and hospitals have filed class-action lawsuits against both Blues plans. Plans have said their rescissions were reasonable and based on individuals misrepresenting themselves on applications.

In an attempt to do "the right thing," Kaiser will offer coverage at a community-rated price to 1,092 people whose policies it rescinded between 2004 and 2006, Senior Vice President and National Health Plan Manager Jerry Fleming said. Kaiser will also pay a $300,000 administrative fine and agreed to improve its medical underwriting processes.

Health Net agreed to offer coverage for 85 former enrollees, but the terms had yet to be finalized, Ehnes said.

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