BILL ANALYSIS
AB 2
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 2 (De La Torre) - As Amended: April 20, 2009
SUBJECT : Individual health care coverage.
SUMMARY : Imposes specific requirements and standards on health
care service plans licensed by the Department of Managed Health
Care (DMHC) and health insurers subject to regulation by the
California Department of Insurance (CDI), (collectively
carriers) related to the application forms, medical
underwriting, and notice and disclosure of rights and
responsibilities for individual, non-group health plan
contracts, and health insurance policies, including the
establishment of an independent external review process related
to a carrier's decision to cancel or rescind an individual's
health care coverage. Specifically, this bill :
1)Requires DMHC and CDI to jointly establish, by regulation,
standard information and health history questions that
carriers must use in individual health care coverage
application forms, as specified.
2)Requires the regulation developed pursuant to 1) above to
include a pool of approved questions for use in applications,
and prohibits applications from containing any other questions
except for those from the pool of approved questions.
3)Requires the standard information and health history questions
developed for applications to contain clear and unambiguous
information and questions designed to ascertain the health
history of applicants, to be based on medical information
reasonable and necessary for medical underwriting purposes,
and to include a limitation on how far back in time from the
application date the applicant was diagnosed and treated for
the health condition specified in the question.
4)Requires carriers to use only the standard pool of approved
questions within six months after adoption, and on and after
January 1, 2011, requires all individual coverage applications
to be approved by DMHC or CDI.
5)Requires a carrier to complete medical underwriting prior to
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issuing a health plan contract or health insurance policy,
defined as a reasonable investigation of the applicant's
health history information, which includes but is not limited
to both of the following:
a) Ensuring that information submitted on the application
form and the material submitted with the application form
is complete and accurate; and,
b) Resolving all reasonable questions arising from the
application form, materials submitted with the application,
or any information obtained by a health plan or health
insurer as part of the verification of the accuracy and
completeness of the application form.
6)Requires a carrier to adopt and implement written medical
underwriting policies and procedures, and to file the policies
and procedures with the respective regulator on or before
January 1, 2011, to ensure that the carrier does all of the
following with respect to an application for health care
coverage:
a) Reviews all of the following:
i) Information on the application and any materials
submitted with the application form for accuracy and
completeness;
ii) Claims information about the applicant that is
within the carrier's own claims information; and,
iii) At least one commercially available prescription
drug database for information about the applicant.
b) Identifies and makes inquiries, including contacting the
applicant about any questions raised by omissions,
ambiguities, or inconsistencies based upon the information
collected pursuant to 6) a) above, and requires the carrier
to document all information collected during the
underwriting review process.
7)Requires health plans and health insurers to send a copy of a
written application to an individual within ten days after
coverage is issued, with a notice that states all of the
following:
a) The applicant should review the application carefully
and notify the health plan or health insurer within 30 days
of any inaccuracy. If the applicant provides the carrier
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with new information within the 30-day period, applies the
carriers medical underwriting policies as required under 6)
above;
b) Any intentional material misrepresentation or
intentional material omission in the application
information may result in cancellation or rescission of the
contract; and,
c) The applicant should retain a copy of the completed
written application for the applicant's records.
8)After an individual contract or policy is issued, prohibits
the cancellation or rescission of the contract or policy
unless all of the following apply:
a) There was a material misrepresentation or material
omission in the written application prior to the issuance
of the contract or policy that would have prevented the
contract from being entered into;
b) The carrier completed medical underwriting pursuant to
6) above prior to issuing the coverage;
c) The carrier demonstrates that the applicant
intentionally misrepresented or intentionally omitted the
information on the application prior to the issuance of
coverage with the purpose of misrepresenting his or her
health history; in order to obtain health care coverage;
d) The application form was approved by DMHC or CDI; and,
e) The carrier complied with the requirement to send the
complete application to the applicant along with the
written notice as required under 7) above.
9)Authorizes carriers to conduct a "postcontract investigation,"
if the carrier obtains information that a covered person may
have intentionally misrepresented or intentionally omitted
information on the application and requires carriers to send a
specified notice within five days to the covered person that
the investigation may lead to rescission or cancellation of
the covered person's coverage.
10)Establishes specific timelines and notice requirements
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related to the investigation in 9) above, and any subsequent
cancellation or rescission that results, including specific
and detailed information that must be included in notices
provided to covered persons under the contracts or policies
that are the subject of a "postissuance investigation,"
including, among other elements:
a) An opportunity for the covered person to provide any
evidence or information within 45 business days to negate
the plan's reasons for initiating the investigation;
b) A requirement that the carrier complete the
investigation within 90 days of the notice;
c) A written notice via regular and certified mail to the
covered person once the investigation is complete with one
of the following determinations:
i) The carrier has determined that the covered person
did not intentionally misrepresent or intentionally omit
material information during the application process and
that the covered person's health care coverage will not
be canceled or rescinded; or,
ii) The carrier intends to seek approval from the
director of DMHC or CDI commissioner to cancel or rescind
the covered person's coverage for intentional
misrepresentation or intentional omission of material
information during the application for coverage process.
11)Requires the written notice pursuant to 10) c) above to
include specified information including notice that any
decision to cancel or rescind the covered person's coverage
will not become effective until the independent review
organization established by this bill upholds the decision,
unless the covered person opts out of the independent review.
12)Requires carriers to continue to authorize and provide all
medically necessary services until the effective date of a
cancellation or rescission, and establishes the effective date
of cancellation or any rescission as no earlier than the date
of certified notice to the covered person that the independent
review organization established in this bill has made a
determination upholding the decision to cancel or rescind.
13)Commencing January 1, 2011, establishes within DMHC and CDI
an independent review process (IRP) for review of carrier
decisions to cancel or rescind individual health plan
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contracts or individual health insurance policies and requires
that all carrier decisions to cancel or rescind be reviewed in
the IRP, unless the covered person opts-out of the process.
14)Establishes the following related to the IRP:
a) That a covered person may designate an agent to act on
his or her behalf;
b) That the IRP is in addition to any other procedures or
remedies that may be available;
c) Specific requirements related to carrier disclosure of
the rights to an automatic IRP in member handbooks,
evidence of coverage and other related materials on or
before January 1, 2011;
d) Specific timelines and specified materials related to
the IRP which carriers must provide to DMHC and CDI within
specified timelines and concurrently to the covered person,
including requiring the carrier to provide a copy of all
information submitted to the covered person and any
information the covered person submitted to the carrier,
and requiring any medical information of the covered person
to be kept confidential;
e) Specific timelines and detailed requirements for DMHC
and CDI to expeditiously review IRP requests and notify
covered persons related to their rights and
responsibilities in the IRP process and related to any
proposed cancellation or rescission;
f) Requirements for DMHC and CDI to contract or otherwise
arrange for one or more independent not-for-profit
organizations to conduct IRPs, where the review
organizations (organizations) are independent of carriers
doing business in California and meet the specific conflict
of interest standards established by this bill, the
director of DMHC and the commissioner of CDI by
regulations, and consistent with existing conflict of
interest provisions for the Independent Medical Reviews
conducted under existing law by DMHC and CDI, to the extent
applicable;
g) Specific timelines and process for the conduct of the
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IRPs by the organizations, including the requirement that
arbitrators selected by the organizations meet specified
minimum requirements, including that the arbitrator holds
an unrestricted license to practice law in California, that
the arbitrators have the ability to request opinions from
expert consultants, as defined, related to questions other
than whether the covered person intentionally
misrepresented or intentionally omitted information in the
application process and the arbitrators analysis and
determination state the reasons for the determination, as
specified;
h) That an expert consultant requested by an arbitrator may
not render an opinion as to whether the covered person
intentionally misrepresented or intentionally omitted
information during the application process;
i) Required contract provisions to be included in the
contracts between DMHC and CDI and IRP organizations,
including specific quality assurance mechanisms, conflict
of interest provisions and protections to ensure the
selection of independent, qualified arbitrators;
j) That DMHC and CDI immediately adopt the IRP
determination and promptly issue a written decision to the
parties that is binding on the carrier;
aa) That DMHC and CDI, after removing the names of the
parties, as specified, make available to the public IRP
decisions adopted by DMHC and CDI, at cost, and after
considering applicable laws governing disclosure of public
records, confidentiality, and persons privacy;
bb) A prohibition from carriers engaging in conduct to
prolong the IRP, subject to a specific administrative
penalty of $5,000 for each day the IRP is prolonged or an
IRP decision is not implemented;
cc) A per case assessment on carriers imposed by DMHC and
CDI to support the costs of the IRP, require the fees to be
set after consideration of the results of the competitive
bidding process, and require the costs of the IRP for
covered persons to be borne by affected carriers. Exempt
carriers that do not cancel or rescind contracts pursuant
to this bill from the fees and assessments established;
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dd) On and after January 1, 2010, reporting requirements on
carriers related to the number of individual contracts and
policies issued and the number where the carrier initiated
a cancellation or rescission, and the requirement that DMHC
and CDI annually post the information carriers report on
the respective department Internet Web sites on or before
March 31 of each year, commencing March 31, 2010; and,
ee) Exempts from the provisions of this bill plan contracts
or health insurance policies for coverage issued under
Medi-Cal, Access for Infants and Mothers Program, the
Healthy Families Program and the federal Medicare Program.
EXISTING LAW :
1)Provides for regulation of health plans by DMHC under the
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene)
and for regulation of health insurers by the CDI under the
Insurance Code.
2)Prohibits health plans and health insurers from engaging in
"post-claims underwriting," defined as rescinding, canceling,
or limiting of a plan contract due to a plan or insurer's
failure to complete medical underwriting and resolve all
reasonable questions arising from written information
submitted on or with an application before issuing the plan
contract or policy. For health plans regulated by DMHC,
provides that the prohibition against post-claims underwriting
does not limit a plan's remedies upon a showing of willful
misrepresentation.
3)Prohibits a health plan or health insurer from rescinding or
modifying an authorization for services after the service is
rendered, for any reason, including but not limited to, the
health plan or health insurer's subsequent rescission,
cancellation, or modification of the enrollee or insured's
contract or policy, or the health plan or health insurer's
subsequent determination that the carrier did not make an
accurate determination of the enrollee or subscriber's
eligibility.
4)Requires applications for health plan contracts and health
insurance policies to conform to certain standards for
underwriting, including clear and unambiguous questions, when
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health-related questions are used to ascertain an applicant's
health, and requires questions relating to the health
condition or health history of the applicant to be based on
medical information reasonable and necessary for medical
underwriting purposes.
5)Prohibits health insurers but not health plans from voiding
(rescinding) a policy or denying a claim based on
misstatements in the application after two years, except for
fraudulent misrepresentations, sometimes referred to as an
incontestability clause for insurance purposes.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, news reports
and lawsuits have identified families saddled with thousands
in medical debt for treatment they believed was covered. In
many cases, individual health coverage was rescinded by plans
on grounds that the consumers submitted false information on
their original applications several years prior. The author
points out that further investigation of these cases often
revealed that insurers and health plans only scoured the
applications searching for any omission or possible inaccuracy
after the patient submitted claims for expensive, medically
necessary treatment. The author argues that this bill
protects consumers from open-ended and unlimited exposure to
losing health coverage going back to issues arising from the
application, while giving insurers a reasonable amount of time
to review and investigate individual applications.
2)RESCISSION . "Rescission" is the process whereby insurers
cancel health coverage on the basis of alleged missing or
incomplete information on the part of the insured person at
the time of application. Rescission involves a determination
by the plan that the contract between the plan and the
enrollee never existed because of a misrepresentation by the
enrollee at the time of application, and that; therefore, any
health care services the enrollee received during the entire
time of the contract are to be paid for by the enrollee.
Rescission is what is known as an equitable remedy, where the
remedy is meant to put the parties back to their original
status, with premiums refunded to the enrollee, and any health
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services paid for by the plan owed by the enrollee. In 2007,
DMHC initiated a non-routine investigation of the five largest
Knox-Keene plans related to rescissions of health coverage.
The DMHC investigation found the following:
-------------------------
| Number of Coverage |
| Rescissions |
| Five Largest Knox-Keene |
| Plans |
-------------------------
|-----------+--------+----|
| 2002 | 882| |
|-----------+--------+----|
| 2003 | 743| |
|-----------+--------+----|
| 2004 | 1,436| |
|-----------+--------+----|
| 2005 | 1,536| |
|-----------+--------+----|
| 2006 | 302| |
-------------------------
-------------------------
|Source: |
|DMHC |
-------------------------
3)RESCISSSION SETTLEMENTS . In 2008, DMHC reached agreements
with Anthem Blue Cross, Blue Shield, Health Net, Kaiser, and
PacifiCare requiring them to pay fines ranging from $50,000 to
$10 million, with additional fines to be levied if corrective
action plans for rescission policies and practices going
forward are not submitted by the health plans, approved by
DMHC, and properly implemented. The settlements require the
plans to offer health care coverage to former members whose
policies they rescinded or cancelled over the past four years,
regardless of the former member's health condition, and to
reimburse the affected consumers for out-of-pocket costs
incurred after the policies were rescinded. DMHC ordered the
plans to use a fair outside arbiter selected by the DMHC to
review every rescission uncovered in the investigations and
determine remedies, such as payment of medical care and
premiums. Reimbursement for health care services will be
limited to those who are found by the arbiter to have been
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wrongly rescinded. According to DMHC, by the end of February
2009, of the 3,300 enrollees who were identified as having
coverage rescinded and required to be reinstated under the
settlements, all had been offered coverage. Of those offered
reinstatement, 170 had re-started coverage (5%) and 293 (8%)
have requested reimbursement under the terms of the
settlement. DMHC is reportedly in the process of reviewing
and finalizing the health plan corrective action plans related
to rescission policies and practices going forward.
In late 2008 and early 2009, CDI reached agreements with Anthem
Blue Cross, Blue Shield, and Health Net related to the
insurers' rescission of health insurance products subject to
CDI's jurisdiction. As part of the CDI settlements, insurers
agreed to offer coverage to consumers whose individual,
family, or short-term health policies were previously
terminated without subjecting them to medical underwriting or
exclusions for pre-existing conditions, and to pay any medical
expenses that would have been covered under the rescinded
policies if those costs had not already been covered by
another source. The CDI agreements do not allow the insurers
to use the validity of the rescission as a defense to any
claim for reimbursement of medical expenses. In the CDI
settlements, insurers agreed to an expedited independent
arbitration process to resolve any disputes regarding the
reimbursements for medical expenses, such as coverage issues
or medical necessity determinations. As part of the
settlements with CDI, insurers also agreed to make changes to
the application forms, underwriting process, agent and broker
training, notification to consumers and providers of an
investigation regarding information in the application, and
oversight of its claims handling. Insurers also agreed to
establish an independent third party review process for
rescissions going forward.
Under the agreements with both DMHC and CDI, rescinded patients
can accept new coverage without forfeiting any legal rights
but they must execute a release of any and all
rescission-related claims against plans or insurers in order
to receive reimbursement for out-of-pocket medical expenses.
In addition to the settlements with regulators, the Los Angeles
City Attorney has separately sued several insurers within the
City's boundaries. There have also been multiple individual
and class action lawsuits brought against insurers by
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individuals and families who argue that their policies were
improperly rescinded or canceled.
4)POST-CLAIMS UNDERWRITING . The practice of waiting for a
health care claim to come in and then canceling or rescinding
the policy retroactively is known as post-claims underwriting.
Post-claims underwriting is essentially using the
underwriting process after the fact instead of before coverage
is offered. In health coverage, because of the dual
regulatory frameworks of DMHC and CDI, there are different
statutory provisions that apply to health plans under DMHC and
health insurers under CDI in this area. Post-claims
underwriting is prohibited under both Knox-Keene and the
Insurance Code and health plans under both frameworks are
required to complete medical underwriting and to have answered
all reasonable questions arising from written information
submitted on or with an application prior to issuing the
coverage. Under Knox-Keene, the statute provides that the
prohibition against post-claims does not restrict a plan's
ability to rescind coverage in cases where the patient has
engaged in willful misrepresentation. The section of law
prohibiting post-claims underwriting in the Insurance Code
does not include the same specific reference to rescissions
based on willful misrepresentation.
5)THE HAILEY COURT RULING . In 2000, Cindy Hailey applied to
Blue Shield for herself, her husband, Steve and their son even
though her new employer offered coverage, because the
employer's plan did not include the family's doctor. Cindy
completed an individual application and Blue Shield issued a
policy at the preferred rate in December 2000. In February
2001, Steve Hailey was hospitalized, prompting Blue Shield to
investigate the application. In June 2001, Blue Shield
retroactively cancelled the Hailey's coverage. Blue Shield
alleged that Cindy Hailey had failed to disclose in the
application information about her husband's prior medical
history, which Blue Shield uncovered in an investigation it
initiated when Steve Hailey incurred significant medical bills
following a serious automobile accident. Cindy Hailey
asserted that she did not realize the application called for
information about her dependents and thought she was only
being asked to provide information on her own medical issues.
Without health coverage, Steve Hailey experienced significant
health consequences and permanent disability. The trial court
had granted summary judgment in favor of Blue Shield and
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ordered the Hailey's to pay more than $100,000 in medical
costs to Blue Shield.
The Court of Appeal reversed the trial court, affirmed the
Knox-Keene prohibition against post-claims underwriting and
held that health plans are precluded from rescinding a
contract for a material misrepresentation or omission unless
the plan can demonstrate: a) The misrepresentation was
willful; or, b) The plan made reasonable efforts to ensure the
subscriber's application was accurate and complete as part of
the precontract underwriting process. The Court raised
questions about the Blue Shield application, finding it "no
model of clarity" and wrote that "Cindy's explanation for
omission was not patently unbelievable." The Appeals Court
sent the case back to the trial court level to determine
whether a) or b) were true. In addition, the Court found that
the Hailey's complaint sufficiently alleged that they suffered
severe emotional distress and suggested that they may have a
claim of bad faith against the insurer, another issue for
consideration by the trial court. On March 25, 2008, the
California Supreme Court refused to take up on appeal Hailey
v. California Physician's Service (dba Blue Shield of
California) 2007, Cal.App.4th, effectively making the Hailey
decision the applicable law relating to rescission under
Knox-Keene.
6)RELATED LEGISLATION. AB 108 (Hayashi), pending in the
Assembly Appropriations Committee, prohibits health plans and
health insurers, after 18 months from the issuance of an
individual health plan contract or health insurance policy,
from rescinding the individual coverage for any reason, and
prohibits canceling, limiting, or raising premiums in a
contract or policy due to any omissions, misrepresentations,
or inaccuracies in the application form, whether willful or
not.
7)PREVIOUS LEGISLATION .
a) AB 1150 (Lieu), Chapter 188, Statutes of 2008, prohibits
a health plan or insurer from compensating any person
retained, employed, or contracted with, to review medical
underwriting decisions based on, or related to, the number
of contracts, policies, or certificates, or on the cost of
services for a contract, policy, or certificate, that the
person has caused or recommended to be rescinded, canceled,
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or limited, or the resulting cost savings to the plan or
insurer. Prohibits a plan or insurer from setting
performance goals or quotas based on the number of persons
whose health coverage is rescinded or any financial savings
to the plan or insurer associated with rescission of
coverage.
b) AB 1945 (De La Torre), substantially similar to this
bill, would have imposed specific requirements and
standards on health plans and health insurers related to
the application forms, medical underwriting and notice and
disclosure of rights and responsibilities for individual
coverage, including the establishment of an independent
external review process related to decisions to cancel or
rescind an individual's health care coverage. AB 1945
was vetoed by Governor Schwarzenegger. The veto message
read as follows:
I believe that unfair rescissions are a
deplorable practice. My Department of Managed
Health Care has fought for - and won -
significant settlements with the industry that
have significantly changed the marketplace and
reinstated coverage for thousands of consumers.
The Department's settlements are unprecedented
and have fundamentally changed the way health
plans operate in this state. The individual
insurance market is fragile, and we must balance
the need for strong consumer protections with the
recognition that unintended consequences can
tighten this market even more. Unfortunately,
the provisions of this bill will only increase
costs and further restrict access for over 2
million Californians that currently obtain
coverage in the individual market.
My Administration proposed comprehensive
legislation to address this problem. In
particular, my proposal contained several strong
consumer protections that this bill fails to
address. My proposal established a standard
application to remove any possibility of plans
using different health questions to disadvantage
applicants. This bill does not contain that
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protection. My proposal required agents and
brokers to sign under penalty of perjury that
they had not altered an applicant's answers.
Penalties were levied if they engaged in this
unscrupulous behavior. This bill does not
contain that protection. My proposal clearly
outlined the rules that plans and insurers had to
follow when considering whether to offer a
contract to an applicant. This bill does not
contain that protection. My proposal didn't
allow plans to rescind or cancel if a doctor
failed to inform a patient of a medical
condition. This bill does not contain that
protection. My proposal contained a two-year
look back protection that prevented plans from
rescinding or canceling after two years. This
bill does not contain that protection. My
proposal protected family members and required
coverage to be continued without additional
underwriting or increase in premiums. This bill
does not contain that protection.
This bill was written by the attorneys that stand
to benefit from its provisions. In rushing to
protect a right to litigate, the proponents
failed to consider the real consumer protections
that are needed.
I would call on the Legislature next year to work
with my Administration on real legislation that
enacts important protections for consumers
without increasing premiums and reducing coverage
for those who need it most.
c) AB 2549 (Hayashi) of 2008 would have prohibited health
plans and health insurers from rescinding a health plan
contract or health insurance policy after six months from
the time the contract is effective for any reason. In its
initial form, AB 2549 restricted rescissions and
cancellations to a six-month period. AB 2549 was held
under submission on the Senate Appropriations Suspense
file.
d) AB 2569 (De Leon), Chapter 604, Statutes of 2008,
requires health plans and health insurers to offer new
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coverage, or continue existing coverage, for any individual
whose coverage was rescinded, other than the individual
whose information led to the rescission, within 60 days,
without medical underwriting, as defined. Establishes a
duty for agents and brokers selling individual health
coverage products to assist applicants in providing answers
to health questions accurately and completely, as
specified.
e) AB 1 X1 (Nunez) of 2007 would have enacted
comprehensive health care system reforms, including
coverage expansions, an employer spending requirement and
individual health insurance mandate, affordability
protections, insurance market reforms, cost containment
elements and provisions to support health care safety net
providers. Among other market reform elements, AB 1 X1
prohibited carriers from setting performance goals or
quotas or providing additional compensation based on the
number of people whose coverage was rescinded, or the
financial savings of the plan associated with the
rescission of coverage. In January 2008, AB 1 X1 failed
passage in the Senate Health Committee.
f) AB 1324 (De La Torre), Chapter 602, Statutes of 2007,
clarifies and makes specific provisions of law that
currently prohibit health plans and health insurers, where
the plan or insurer authorizes a specific type of treatment
by a health care provider, from rescinding or modifying the
authorization after the provider renders the health care
service in good faith and pursuant to the authorization.
g) AB 1100 (Willie Brown), Chapter 1210, Statutes of 1993,
enacts the Health Insurance Access and Equity Act which
requires applications for health plan contracts or health
insurance policies to conform to certain standards for
underwriting, including clear and unambiguous questions
when health-related questions are used to ascertain an
applicant's health, and prohibits post-claims underwriting.
8)SUPPORT . The California Medical Association (CMA), sponsor of
this bill, states that the time has come for an external
review process to stop insurance plans from acting as "judge
and jury" when they rescind coverage. CMA continues that this
bill provides protection for patients by allowing regulators
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to independently review potential rescissions and improves the
process at the front end by requiring carriers to develop
applications using only a pool of approved questions.
Consumer Watchdog writes in support of this bill that
rescission of a health coverage policy following an illness
has a particularly harsh impact on the patient. A rescinded
policy is cancelled as of the day it was sold, leaving
patients in deep medical debt, uninsured and virtually
uninsurable, while facing ongoing health care costs. Consumer
Watchdog states that patients left without health coverage
suffer great personal hardship or bankruptcy and must often
rely on overstretched public health programs for ongoing
medical treatment. According to Consumer Watchdog, this bill
is uncomplicated. The key component of the bill merely
reiterates what consumer advocates and regulators have long
said is the legal standard for health plan 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. Consumer Watchdog contends that this bill would
end "gotcha" cancellations against innocent patients who never
knew of, or failed to understand the significance of, a past
medical problem. Consumer Attorneys of California write in
support that this is a historic bill that will help stop
carriers from rescinding contracts based on the innocent
mistakes consumers make.
9)OPPOSE UNLESS AMENDED . Kaiser Permanente Medical Care Program
writes that it is opposed unless this bill is amended to
include clear statutory guidelines relating to rescission,
including requiring carriers to use standard questions
approved by regulators, requiring carriers to do medical
underwriting up front and a prohibition on rescission unless
the applicant misstates or omits relevant information on the
application for coverage. Kaiser argues that this bill is
flawed because it pushes the process toward litigation by
requiring carriers to prove that an applicant intentionally
misrepresented or omitted information. Kaiser is also
concerned that this bill overrides the current law ability of
carriers to cancel coverage for failure to pay premiums. Blue
Shield of California, also opposes this bill unless it is
amended and writes that this bill includes language written by
trial attorneys to gain the upper hand in their contingency
fee cases against carriers. Delta Dental writes that
specialized health plans, such as dental health plans, should
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be exempted from this bill, and not be subjected to prior
regulatory approval of individual dental coverage
applications.
10)OPPOSITION . Health plans, business groups and health
underwriters write in opposition to this bill. The California
Association of Health Plans contends that this bill overturns
the Hailey decision by creating an intentional standard for
every rescission case. Health Net states that the willful
standard will be difficult if not impossible to prove. Health
Net expresses concern that the willful standard in this bill
will take effect prior to the process for having new
applications approved by the regulators and to the fact that
carriers would no longer be able to cancel coverage for
non-payment of premium. California Association of Health
Underwriters (CAHU) opposes this bill and argues that it will
lead to age discrimination because individuals over 50 have
higher medical costs and carriers will not be willing to issue
coverage to them if they cannot understand the risk they are
assuming. CAHU continues that this bill rewards those who lie
or withhold information on the application by ensuring that
their coverage will last for at least five months before it
can be rescinded making it worthwhile to wait until you are
sick, lie on the application and get coverage for your
recently diagnosed illness. The Civil Justice Association
writes in opposition to this bill that the requirement of
ascertaining intent renders the IRP both impotent and moot.
California Chamber of Commerce objects to the requirement in
this bill that all rescissions be approved by DMHC and CDI
because it will significantly increase costs for individuals
and result in an increase in the number of uninsured.
11)POLICY QUESTION . This bill treats cancellation and
rescission in the same manner. Under current law, carriers
can generally cancel coverage for failure to pay premiums or
for fraud. Is it the author's intent to prohibit carriers
from canceling coverage when the covered person has failed to
pay the premium?
REGISTERED SUPPORT / OPPOSITION :
AB 2
Page 18
Support
California Medical Association (sponsor)
America Federation of State, County and Municipal Employees,
AFL-CIO
American Cancer Society
California Academy of Family Physicians
California Alliance for Retired Americans
California Chiropractic Association
California Chiropractic Association
California Communities United Institute
California Nurses Association/National Nurses Organizing
Committee
California School Employees Association
California Teachers Association
Congress of California Seniors
Consumer Attorneys of California
Consumer Watchdog
Health Access California
Latino Coalition for a Healthy California
Office of the Los Angeles City Attorney
Oppose unless amended
Blue Shield of California
Delta Dental of California
Kaiser Permanente Medical Care Program
Opposition
Association of California Life and Health Insurers
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
Civil Justice Association
Health Net
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097