Managed Care Law Weekly
In a survey released today, California’s top HMO regulator harshly criticized Blue Cross of California for violating a state law that bars health insurers from retroactively canceling coverage unless the insurers prove that a patient willfully misrepresented past medical conditions. The survey found that out of 90 patient complaints reviewed, Blue Cross illegally rescinded coverage in each case.
The Department of Managed Health Care (DMHC) is crafting new rules to give regulators more power to crack down on the illegal activity. The new regulations come in response to a petition filed by FTCR citing overwhelming evidence of widespread illegal cancellations of coverage by all of California’s largest insurers. As a result of the practice, patients have been left uninsured, uninsurable and often hundreds of thousands of dollars in debt.
“Out of 90 cases reviewed to determine whether Blue Cross abided by state law, Blue Cross struck out 90 times. This survey is damning evidence that Blue Cross has put patients at risk of medical bankruptcy by flagrantly violating state patient protection laws,” said Jerry Flanagan, health care policy director for FTCR. “The survey clears the way for tough new rules designed to crack down on lawbreakers. Other insurers can expect the same tough review and all companies will likely face fines and penalties.”
Currently, insurers often retroactively cancel individual policyholders’ coverage due to so-called “omissions” on a patient’s enrollment application — which by design is vague, overcomplicated and asks misleading questions — regardless of whether a patient intentionally misrepresented their medical histories. However, Section 1389.3 of the California Health and Safety Code bars such cancellation unless there is a “showing of willful misrepresentation.”
The DMHC audit shows that Blue Cross does not review medical records until after a patient gets sick, then rescinds coverage based upon discrepancies between the medical records and the application. DMHC issued a $1 million fine against Blue Cross.
“Patients do not go to medical school and rarely know of or understand the information in their medical records,” said Jerry Flanagan. “That’s why the law requires plans to check medical records ahead of time and bars them from rescinding coverage unless they can show the patient lied on the application.”
