State HMO Regulator Agrees to New Rules & Hearings on Illegal Policy Cancellations;

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FTCR Says New Rules Are Good News for Patients

Santa Monica, CA — California’s top HMO regulator, the Department of Managed Health Care (DMHC), has announced it will hold hearings and begin writing new rules barring state HMOs and health insurers from their widespread practice of illegally revoking health care policies when patients get sick. The Foundation for Taxpayer and Consumer Rights (FTCR), which petitioned for new the rules, welcomed the opportunity to put an end to the anti-consumer practice that leaves patients without coverage when they need health care the most. The process will begin with a public hearing in Los Angeles January 29.

Read DMHC’s response to FTCR’s petition and its hearing announcement:

“We are happy to hear that regulators are going to crack down on insurers who pull the rug out from under patients when they need coverage the most. Without specific rules, it is clear that insurers will continue to flout the law. Insurance isn’t insurance if you can’t count on it to provide coverage when you get sick,” said Jerry Flanagan of FTCR. “The public hearing and rule making are good news for California patients who have been at the mercy of profiteering HMOs and insurance companies that drop patients to boost their bottom line.”

Read FTCR’s petition to the DMHC:

FTCR said that new regulations and other actions are necessary because Blue Cross, Kaiser, Blue Shield, Health Net, PacifiCare and likely others are illegally revoking health care polices when patients get sick. The overwhelming evidence demonstrates a routine and flagrant violation of state law that bars insurance companies from canceling policies unless patients are shown to have made intentional misrepresentations about this health condition. Currently insurers cancel coverage due to so-called “omissions” on a patient’s enrollment application — induced by the intentionally vague and misleading questions on the applications — regardless of whether patients intentionally misrepresented their medical histories.

FTCR said that due to the overwhelming financial incentive for insurers to revoke coverage when patients rack-up big medical bills, the new regulations must include an independent review by regulators before, not after, HMOs and insurers rescind coverage.

In the petition to the DMHC, FTCR wrote:

“Insurance companies and HMOs are preying on the 2 million to 3 million Californians currently enrolled in individual policies. The companies know those consumers have no employer to protect them and no ally when they are sick and need coverage the most. The companies also know that for many, legal action, including a lawsuit, is not a realistic remedy when facing large, unpaid medical bills.”

In addition to new regulations protecting patients from unfair cancellations of coverage, FTCR called for:

1. Full investigations of all cancellation complaints.

2. Clear and unambiguous insurance enrollment applications.

3. Regulations to remove financial incentives for illegal rescissions.

4. Penalties and fines for each illegal cancellation.

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FTCR is California’s leading public interest watchdog organization. For more information, visit us on the web at:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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