State regulators are close to a deal with PacifiCare Health Systems Inc. to restore coverage to patients whose policies were canceled unfairly – similar to deals reached with Kaiser Permanente and Health Net Inc.
The California Department of Managed Health Care, which monitors health maintenance organizations in California, struck agreements May 15 with Oakland-based Kaiser Permanente and Health Net of Woodland Hills to reinstate coverage to some 1,178 patients whose health coverage they canceled through "rescission" policies used by insurers to drop coverage when they conclude patients withheld or lied about vital information or medical conditions.
Now the agency says it is just days away from striking a similar
pact with PacifiCare Health Systems Inc. of Cypress – assuming all of
the pieces fall into the place.
"It is in the hands of the attorneys," said Lynne Randolph, a
spokeswoman for the Department of Managed Health Care. "We think
they’ve agreed in principle to a similar agreement such as the Kaiser"
deal. The department also is talking with Blue Shield of California in San Francisco and Anthem Blue Cross, formerly Blue Cross of California.
Meanwhile the deals and the controversy surrounding the widespread practice of "rescission" are prompting new calls to sharpen state rules governing when insurers can cancel coverage, either through regulation
or new legislation.
The effort comes after a January court ruling that set some restrictions on the practice but still left it vague.
Consumer advocates are calling for the department to move forward with draft regulations it published late last year to better define when insurers can revoke coverage and how to deal with patients.
The legal standard – following the January California Court of Appeal decision in Hailey v. California Physicians of California, doing business as Blue Shield of California – is that insurers must prove a patient "willfully misrepresented" information.
Patients have the right to know when they’re being investigated for lying on an application form and to be allowed to clarify information, said Jerry Flanagan, health care policy director for the Santa Monica-based Consumer Watchdog, formerly the Foundation for Taxpayer & Consumer Rights. He added that insurers shouldn’t be the final arbiters of these disputes with
patients, and insurance companies should be required to investigate patients before they purchase an insurance policy – not after they file a large claim.
Flanagan is calling for "emergency regulations" through an expedited rule-making process allowed by California’s Office of
Administrative Law.
He’s worried that the Department of Managed Health Care has abandoned its proposed regulations in favor of legislative reforms he says could give insurers more of an opportunity to drag things out and influence the process. Two Assembly bills, 2549 and 1945, in the very early stages have been authored by Assemblywoman Mary Hayashi, D-Hayward, and Assemblyman Hector De La Torre, D-South Gate.
Hayashi’s bill would allow insurers to drop patients only within the first six months, and De La Torre’s bill establishes a third party to review cases.
Randolph of the managed health care department, said her agency will continue to work on regulations with the Department of Insurance, although she didn’t know if they would be "emergency" regulations.
"The DMHC is concentrating on extending coverage to as many people
as possible. That is where we are devoting our energy," said Randolph.
"The question of regulation will be considered in the near future. It
is not abandoned."
Randolph said the deals with insurers are, in the meantime, "a very
significant step" to regaining coverage for people who were unfairly
dropped. Under the Kaiser agreement, patients have the right to buy
coverage at the standard rate, receive payment for certain claims and
have any related disputes resolved through a third party arbiter.
Kaiser Permanente, which says it stopped using rescissions two years ago, nevertheless reserved the right to use them in the future under its agreement with regulators.
Kaiser spokesman Mike Lassister said Kaiser will wait for the agency’s regulations or guidelines to determine what is allowable before using rescission again.
Randolph said, "Health plans have the right in the individual market to rate the risk of the people it wants to cover and they have the choice on extending coverage."
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