Los Angeles, CA — Patients whose health coverage was retroactively cancelled after they got sick and filed an insurance claim held a press conference outside Governor Schwarzenegger’s Los Angeles office today. The patients delivered a letter to the governor urging him to sign historic legislation barring insurance companies from retroactively canceling health policies unless a patient lied about past health conditions on an application for coverage.
Watch an excerpt of this year’s State of the State address in which the governor promised to protect Californians from retroactive insurance cancellations on You Tube: http://www.youtube.com/watch?v=FULW3aNsS4Y.
See the letter to Governor Schwarzenegger below for various public statements the governor has made pledging to protect innocent patients from retroactive cancellations of coverage.
Assembly Bill 1945 by Assemblyman Hector De La Torre (D-South Gate), which passed the legislature with bipartisan support, comes in response to widespread news coverage of insurers violating state law by using innocent omissions on an insurance applications to cancel coverage after a patient falls ill. Thousands of cancelled patients have been left uninsured, uninsurable and often hundreds of thousands of dollars in debt while facing ongoing medical treatments.
The key element of Assembly Bill 1945 states that a patient’s health coverage cannot be rescinded unless the patient intentionally misrepresented or intentionally omitted health information on his or her application for coverage. The bill also establishes a process for patients to appeal rescissions to an independent review panel and requires insurers to continue to pay for health care services unless the independent review panel agrees that a patient lied about a health condition on the application.
Health insurance companies strongly opposed the legislation. Rescinding innocent patients helps insurance companies protect their profit margins by avoiding costly medical bills.
LETTER TO GOVERNOR:
You have a historic opportunity to end a practice you have strongly condemned by signing AB 1945 into law. AB 1945 will once and for all ban health insurers from wrongly canceling the health coverage of innocent patients after they get sick and file a claim.
We look forward to discussing this legislation with you or your staff. The key issues we would like you to consider are: 1) This is the bill you asked for; 2) The Department of Managed Health Care (DMHC) settlements with insurers do not protect patients from future rescissions; and, 3) AB 1945 does not effect the DMHC settlements.
This is the bill you asked for
AB 1945 is uncomplicated. It merely reiterates what consumer advocates, you, and your Administration have long said is the legal standard for rescission: Patients cannot be retroactively cancelled unless they lied about a health condition by intentionally omitting or intentionally misrepresenting health information when applying for coverage. For a rescission to be valid, the omitted health information must also be “material” to the insurer’s decision to grant coverage. If the insurer would have granted coverage even knowing about health information it claims the patient omitted at the time of the application, then that information cannot be grounds for a retroactive cancellation after the patient gets seriously ill and files a claim.
In your State of the State address last January, you recounted the story of a San Diego man whose insurer rescinded his coverage after he was diagnosed with lymphoma. You said:
"But let me make this more personal and real, through a true story about a 51 year old self-employed San Diego man named Todd. Todd had been on his wife’s insurance plan, but after divorce he found a policy with a well-known company. Five months later, he started feeling tired, and soon had lymphoma.
“Now, the insurance company then went back through all of his records looking for a reason to cut him off. They pointed to a knee problem, unrelated to cancer, and they noted that now he weighed less than he did when he applied for the insurance. Well, duh, of course he did, because now he was sick with cancer. But they cut him off. One month after he got sick the company canceled his insurance. Todd died eight months later. We are taking action so what happened to Todd will not happen to any other Californian.”
Under AB 1945, Todd would have been protected, just as you clearly intended in your remarks. Todd’s weight loss was due to illness after coverage was granted, not an intentional misrepresentation or intentional omission on his insurance application. The insurer was only combing the patient’s record, after the fact, for any excuse.
AB 1945 would also end insurance company “gotcha” cancellations against innocent patients who never knew of, or failed to understand the significance of, a past medical problem. In one case, Blue Cross rescinded coverage of a patient after he died of cancer claiming that if the company had known of the patient’s high blood pressure it would have never sold him coverage. However, the patient’s doctor never told him about the single high blood pressure reading.
Without AB 1945, insurers will continue to rescind coverage even if patients honestly filled out their applications for coverage. Another example: Blue Cross rescinded Karen Knee’s coverage claiming she failed to disclose a one-time back spasm she had years earlier. AB 1945 would have protected Karen, who didn’t intentionally omit the back spasm or misrepresent a health condition that would have prevented the coverage from being granted. The application asked Karen to disclose illnesses and significant health problems, not every ache and pain she had ever had.
If you fail to sign AB 1945, innocent patients like Karen will continue to lose coverage when they are sick and need it most. This outcome is contrary to numerous public statements made by you. For example:
* “[It is] outrageous that innocent patients have to live in fear of losing their health care coverage. I look forward to working with my partners in the Legislature to ensure this egregious practice is stopped."
– Sacramento Bee, “Patients gain a victory; Insurance reinstated for some; thousands more get reviews,” Dorsey Griffith, April 18, 2008.
* “As I’ve said before, patients should not live in fear of unfairly losing their healthcare coverage when they need it most – and I look forward to working with the Legislature to ensure this egregious practice is put to an end.”
– Los Angeles Times, “State fines 2 health plans over canceled coverage; Anthem Blue Cross and Blue Shield agree to offer new policies,” Lisa Girion, July 18, 2008.
* “Until we achieve comprehensive healthcare reform, stopping unfair healthcare rescissions is an urgently needed consumer protection. This terrible practice further illustrates the erosion of our healthcare system and the need for comprehensive healthcare reform. Today we are standing up for consumers by putting an end to a deplorable practice, and I will continue working with my partners in the Legislature to stop unfair healthcare rescissions once and for all.”
– Los Angeles Times, “Bonuses for cutting coverage is banned,” Lisa Girion, July 23, 2008.
DMHC settlements do not protect patients from future rescissions
AB 1945 is key to furthering recent settlements negotiated by your Department of Managed Health Care. The settlements provide restitution and new coverage for past rescissions, but they specifically allow insurers to rescind coverage in the future without clarifying the legal standard for doing so. Though the settlements might temporarily slow rescissions—while insurers know they are being watched—only AB 1945 provides future protections for patients by clarifying the legal standard for these devastating cancellations.
The threat of future fines is also not a sufficient deterrent. The insurers will argue that the your failure to sign AB 1945 is a clear message that patients can be rescinded regardless of whether they intentionally misrepresented a health fact on their application.
AB 1945 does not effect DMHC settlements
AB 1945 works in conjunction with the DMHC settlements. In fact, the settlements and the bill act like bookends. Together the DMHC settlements and AB 1945 provide a comprehensive fix to the rescission problem by making past rescission victims whole and protecting other Californians from being left without coverage when they are sick and need it most.
The settlements provide for new coverage of all rescinded patients because insurers violated a provision of the Health & Safety Code – § 1389.3 – which prohibits a company from retroactively investigating a patient’s insurability after that patient files a claim. This prohibition is not changed by AB 1945 and AB 1945 would in no way threaten the ability of those patients to recover losses under the settlement.
Another rescission bill on your desk, AB 2568, which passed the Legislature unopposed, provides some patient protections, particularly in continuing coverage for the rest of the family after a rescission, but leaves open the most critical loophole, the legal standard for rescission.
Lastly, AB 1945 allows patients to have rescissions reviewed by regulators before the rescission is carried out, which would stop many unjust rescissions before patients face loss of coverage and crushing medical bills.
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