Santa Monica, CA — Consumer advocates at the Foundation for Taxpayer and Consumer Rights (FTCR) said today that regulators must act to protect tens of thousands of consumersÂ from a widespread “use it and lose it” insurance industry practice of retroactively canceling health care policies when enrollees get sick.Â Â
Blue Cross of California has settled more than 70 lawsuits brought by patients left with unpaid medical bills when their policies were retroactively canceled.Â The amount of the settlement was not disclosed but the Foundation for Taxpayer and Consumer Rights said individual settlements, while helpful to victims, are not enough to protect other patients.Â Similar complaints have been made against all of the state’s largest insurers.Â
FTCR said regulators must provide independent review of insuranceÂ cancellations, require insurers to pay fines for each inappropriately canceled policy, audit all cancellations completed to date, and make all information about the cancellations available to the public.Â FTCR took issue with “window-dressing” reforms proposed by Blue Cross that do nothing to protect patients.
“Settling 70 cases quietly is tantamount to a confession but regulators have yet to propose any new rules to protect other California patients from similar abuse,” said Jerry Flanagan of FTCR. “The law has been broken. The law is non-negotiable. Regulators must require Blue Cross to comply.Â The anemic policy changes Blue Cross has volunteered are mere window-dressings and do nothing to stop insurers from pulling the rug out from under patients when they need treatment the most.”
The lawsuits alleged that Blue Cross had violated state law that bars insurance companies from denying care unless patients lied about their medical condition or health history on their insurance application. The suits alleged that the enrollment applications are designed to deceive and confuse patients and to induce omissions that could later be cited as reasons for canceling policies.Â Â
Gov. Arnold Schwarzenegger, whose administration oversees the Department of Managed Health Care (DMHC), which announced a single $200,000 fine against Blue Cross in recent weeks, has received $255,800 in campaign contributions from Blue Cross, its corporate parent WellPoint and top executives.Â Read FTCR’s letter to the DMHC about the fine at:Â http://www.ConsumerWatchdog.org/resources/EhnesRescissions.pdf.
“Blue Cross would like to buy itself out of this mess but that will do nothing to change the practice,” said Flanagan.Â Â “Without new rules in place, fines and settlements are just the cost of doing business for California’s most profitable health insurer.”Â Â
In addition toÂ restitution and new coverage for victims, FTCR said regulators must:
1. Provide Independent Review of “WillfulÂ Misrepresentation” and “Actual Intent to Deceive”
The key to determining if a retroactive cancellation is warranted is whether a patient intentionally meant to deceive an insurer.Â Neither Blue Cross, nor any other insurer, should be the final arbiter of whether a patient lied given the significant financial incentive for insurers to deny as many cases as possible.Â Therefore,Â patients must be allowed to receive a review by an independent regulator before rescissions are carried out.Â AÂ similar review process is already in place for patients when a physician’s medical recommendation is denied by an HMO or insurance company.Â
2. End Illegal “Post-Claim Underwriting”
Insurers and HMOs are already required to make decisions about providing coverage based on a person’s medical risk and to ask questions about any issues arising from the enrollment application before granting coverage.Â Insurers should be barred from doing so once patients are enrolled.
3. Audit Rescissions and Require Penalties for Each Illegal Cancelation
The Department of Managed Health Care & DOI must audit all rescissions completed to date and demand restitution, reinstatement of coverage and require penalties for each inappropriately canceled policy. Information about rescissions, including the number of policies canceled and the reasons for those cancellations, must be made available to the public.Â Audits and public reports must be conducted and madeÂ available annually.
4. Require Clear & Unambiguous Applications
ConfusingÂ and vague questions on enrollment forms are designed to trap patients who often do not know what information is in their medical records, and could neither understand it nor accurately report it if they did.Â The forms themselves appear to be part of a strategy to induce an omission that can later be use as excuse to cancel coverage.Â State law already requires enrollment forms to be clear and unambiguous.Â This fix is long overdue.Â
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The Foundation for Taxpayer and Consumer Rights (FTCR) is the California’s leading non-partisan public interest watchdog.Â For More information, visit us on the web at: http://www.ConsumerWatchdog.org