Maryland limits health insurance rescissions

Lawmakers in other states are seeking similar protections against health plans that cancel coverage for the wrong reasons.

By Emily Berry — Posted May 6, 2009

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Maryland Gov. Martin O'Malley is expected to sign into law a new rule limiting health insurance companies' ability to cancel policies retroactively. Meanwhile, lawmakers in other states are considering such proposals.

The Maryland bill, passed unanimously by both the Senate and House of Delegates, shifts the burden of proof to insurers when they want to cancel a policy based on the member's alleged misrepresentation.

Insurance companies, particularly in California, have been accused of closely examining a member's application and trying to rescind coverage after a costly medical bill.

Without technically admitting wrongdoing, health plans, including Kaiser Permanente, Health Net and WellPoint, have paid millions of dollars in fines in California after state regulators accused them of rescinding individual policies for economic reasons.

Maryland Delegate Shawn Tarrant said he introduced his bill in Annapolis at the request of insurance department officials, and he expected that O'Malley would sign the new law. He said this bill was preventive, not a reaction to any insurance rescission patterns.

Meanwhile, in California, state lawmakers are again trying to bar the kind of rescissions that got health plans there in trouble. Gov. Arnold Schwarzenegger last year vetoed a bill requiring independent review of all rescissions.

As of mid-April, two new rescission-related bills were working their way through the legislature in Sacramento.

Two bills introduced in Texas related to rescissions were referred to committee in February and haven't moved since.

A bill pending in Wisconsin is awaiting scheduling for a vote on the Assembly floor, said state Rep. Sandy Pasch, the bill's sponsor.

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