SACRAMENTO, CA — Health insurance companies would be forbidden from jerking coverage from customers when they are sick under proposed new rules in California.

Insurance Commissioner Steve Poizner today introduced historic regulations to prevent the practice called rescission, which has been the target of frequent consumer complaints.

The proposals by state Insurance Commissioner Steve Poizner mark California’s first-ever regulatory steps to clarify rescission laws, preventing the industry practice of unfairly rescinding health insurance policies, he says.

"Consumers deserve to have their insurance companies hold up their end of the deal, paying out claims and not canceling coverage when it’s needed most,” says Mr. Poizner.

Insurance companies have previously taken advantage of ambiguity in existing laws to inappropriately rescind health insurance policies for individuals when they need health insurance coverage the most — after filing claims for medical treatment, the insurance commissioner says.

The Department of Insurance says the new regulations will make sure they insurance companies do all their underwriting before they accept a policyholder and stop the insurer practice of reviewing policy applications for incriminating data once the policyholder becomes sick.

Thousands of California families have been left uninsured through no fault of their own while in the course of medical care, often put in jeopardy of medical bankruptcy and forced to rely on limited public health programs, says Consumer Watchdog, a Santa Monica-based consumer group.

"The rules proposed by the Department of Insurance go a long way to protect innocent patients from losing their coverage when they are sick and need it most," says Jerry Flanagan of Consumer Watchdog. "The Schwarzenegger Administration must also follow through with its planned rules applying to HMOs and PPOs, which are separately overseen by the Department of Managed Health Care. Without such rules, health insurers will be able to discriminate against patients on the basis of which agency regulates their insurer.”

The notice of the regulations will be officially published by the Office of Administrative Law on Friday, June 5. Implementation of the regulations is expected by the end of 2009, following a public hearing, public comment and regulation finalization period.