Cautions That All Health Costs During Gap Must be Covered
Santa Monica, CA — Consumer Watchdog today praised a California state regulator’s efforts to begin reinstating the insurance coverage of patients left uninsured, uninsurable and often hundreds of thousands of dollars in medical debt when their health insurance policies were illegally cancelled after they got sick. The nonprofit consumer group also cautioned that reinstatements must be complete and retroactive, with no gap in coverage from when the policy was issued to the time it was restored.
On Monday, Consumer Watchdog petitioned the state Department of Managed Health Care to announce within 10 days its plans regarding reinstatement of thousands of patients affected by the illegal practice.
"This is a landmark step on the road to justice for the thousands of innocent patients whose health insurance was retroactively cancelled. Today’s announcement applies to only 26 people, but the same law used here will provide reinstatement for thousands more. We look forward to working with the Department," said Jerry Flanagan, Health Care Policy Director for Consumer Watchdog. "However, we caution that reinstatement must be retroactive to the time of the policy cancellation, and health insurers must be liable for all health expenses from the date of issuing the contract through the date of reinstatement. We also very concerned about the state’s plan to subject the remaining thousands of cases to unnecessary and lengthy ‘third-party reviews’ before restoring their coverage.”
A recent survey of Blue Cross of California by the Department of Managed Health Care found that in 90 out of 90 retroactive policy cancellations — known as "rescissions" — that it examined, Blue Cross failed to show that a patient "willfully misrepresented" a known health condition when applying for coverage. Such "willful misrepresentation" is the only legal grounds for rescission.
In a number of cases made public, policies were canceled for issues not related to the illness at hand, for instance the patient’s stated weight on the application, or for omissions or errors that may have been induced by deliberately overcomplicated application forms, or for medical issues in the applicant’s medical record that the applicant was not aware of or did not understand.
The DMHC announced that thousands more of the cancelled patients would have their cases reviewed by a third-party reviewer to determine whether the cancellation was lawful before coverage is reinstated.
Consumer Watchdog said such a step was largely unnecessary because the Department’s own surveys found a systemic failure at Blue Cross and other companies to review a patient’s medical records and/or ask questions about past health conditions — a process called "medical underwriting" — before issuing individual policy coverage.
"Retroactively cancelling patients is illegal as a matter of law if insurance companies fail to review an applicant’s insurability before issuing coverage," said Flanagan. "All illegally cancelled patients must be swiftly reinstated in full, without dragging the process through months or years more of review. That will at least make the insurance companies follow the law on future policy applications.”
Read Consumer Watchdog’s letter written on Monday citing the DMHC’s legal authority and duty to require immediate reinstatement of coverage.
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