So You Think You Have Insurance?

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Preventing Unwarranted Insurance Cancellations

Mark Robison of Santa Rosa did not think he was among the 6 million Californians without health insurance when he was paying more than $500 a month to Blue Cross to cover his family.

Then his 8-year-old son needed minor surgery in connection with an undescended testicle.

Suddenly, Robison was thrust into a hell that has been experienced by thousands of Californians in recent years. His insurance company, Blue Cross of California, began scouring his application and medical records for cause to rescind his insurance coverage after receiving medical care the family assumed was covered.

Blue Cross refused to cover the youth’s medical treatment, citing the Robisons’ failure to disclose the congenital anomaly when they applied for a policy after a brief lapse in coverage in 2003. It was not as if they were hiding their son’s medical history. His condition was in the medical records, but there was no indication it might someday require surgery. The Robisons’ previous coverage was with… Blue Cross of California.

Once Blue Cross rescinded its coverage, the onslaught of calls from bill collectors disrupted the family in an "emotional, financial and spiritual way," Robison said in an interview last week. Robison, a self-employed real estate loan agent, has managed to pay back about half of the $18,000 bill. At one point, seeing the stress on the family, a distraught Tylor blurted out, "Gee, Dad, maybe I shouldn’t have had the operation."

California law is supposed to protect patients against such unwarranted rescissions. But the law is vague, and regulators are often overmatched against the larger insurance companies that fight mightily to preserve their right to deny coverage after the fact.

Assemblyman Hector De La Torre, D-South Gate Los Angeles County, was appalled by the abundance of stories about rescissions by insurance companies. He was particularly disturbed to learn that an insurer pulled coverage from a customer because his records indicated he had slightly elevated blood pressure — even though the doctor indicated that the patient never was advised of it.

"How can you be punished for something you didn’t even know about?" De La Torre asked. "That just seems obscene to the sensibilities of Californians."

His AB 1945 would clarify what has become a legal thicket of state law by declaring that a patient’s health coverage cannot be rescinded unless he or she "intentionally misrepresented or intentionally omitted" material health information on his or her application. That measure breezed through the Assembly, 55-17, and cleared the Senate on a 22-14 vote. The only Bay Area legislator to oppose it in either house was state Sen. Leland Yee, D-San Francisco.

The insurance industry has mounted a fierce lobbying campaign against AB 1945. Jerry Flanagan of Consumer Watchdog, which supports the measure, has counted 35 lobbyists working the halls of the Capitol against it. The industry’s argument is that the law’s requirement of intent would make it too difficult to rescind the coverage of people who are trying to game the system — and whose fraud drives up the cost of insurance for all of us. The industry also suggests that a rash of recent settlements with regulators suggests the system is working. Of course, another way to view thousands of settlements is to recognize the companies’ willingness to push the envelope to deny coverage to customers who become sick.

Moreover, as De La Torre notes, insurance companies have an opportunity — and an obligation — to "do their due diligence" before approving an application and collecting premiums.

The fate of this measure now rests with Gov. Arnold Schwarzenegger, who highlighted the issue with poignancy in his State of the State address. The governor cited the plight of a self-employed San Diego man who lost his coverage after being diagnosed with lymphoma. The insurance company pored through his records and found an undisclosed knee problem, and noted that the man weighed less than he did at the time of his application.

"Well, duh, of course he did, because now he was sick with cancer," Schwarzenegger said, with dramatic emphasis. "But they cut him off. One month after he got sick, the company canceled his insurance. Todd died eight months later."

If insurance companies are doing what they say they are — protecting honest ratepayers by rescinding coverage only in cases of fraud and deception — they have nothing to fear from the clarified rules of AB 1945. Schwarzenegger, who outlined the case as powerfully as anyone, should sign it into law.

Consumer Watchdog
Consumer Watchdog
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