Rescissions: A misguided bill deserved the governor’s veto

Governor Schwarzenegger was right to veto AB 1945 by (Assemblyman Hector De La Torre, D-Southgate).  The bill was falsely portrayed as protection for consumers against rescission, which is the unlawful revocation of health coverage.  In reality, it would have further restricted access to health insurance and caused all of us to pay more, during a time when our economic future is highly unsettled.

The Governor believes strongly that all Californians should have access to health insurance regardless of their health status.  Californians are paying a hidden tax on their health care which subsidizes care for the uninsured.  Rescission, which causes people to be uninsured and uninsurable, only increases the uninsured pool.

For the past two years, Governor Schwarzenegger has sponsored legislation to rid us of unfair rescission once and for all, as part of his comprehensive health care reform package.  For the past two years, his comprehensive solution to help lower costs, preserve access to care and improve quality care, has been rejected.

In his veto message of AB 1945, the Governor labeled rescission “a deplorable practice.”  He has been the number one champion to make the necessary changes so people are not stripped of their health coverage when they file a claim or seek treatment.  For the past two years, his Department of Managed Health Care (DMHC) has fought for — and won – the important changes needed within the health insurance industry to protect consumers.

However, the Governor simply could not sign a bill that would not offer even close to the same level of consumer protections as gained by the DMHC, and would also raise costs and limit access to individual health coverage.

AB 1945 did not contain real consumer protections as the author claimed.  For example, requirements for standardized and easily understandable applications to eliminate the confusion that led to consumer mistakes were not included.  A provision prohibiting rescission when a doctor had failed to inform a patient about his/her medical condition was not included.  A requirement for health plans to complete an evaluation of an applicant’s health condition before offering coverage was not included.

The exclusion of basic consumer protections raised concerns that perhaps AB 1945 wasn’t about protecting consumers at all, but was about protecting the fees that trial attorneys could collect by suing health plans.  Suspiciously, the bill did not include one of the most fundamental of consumer protections, which was to prevent a health plan from rescinding a member after two years for any reason.  Why leave out this essential provision, without which consumers would never be fully protected from the threat of rescission?  Well, trial lawyers would continually make money by preserving the ability to file lawsuit upon lawsuit.  But in ensuring such a boundless right to litigate, the authors of this bill lost sight of the real protections consumers need and guarantee that the costs of health coverage would rise.

The Governor was not alone in its concern that this bill became a Trojan horse.  According to the Civil Justice Association of California (CJAC), trial lawyers significantly changed AB 1945 from its original intent.  CJAC President John H. Sullivan has noted in a press release that the revised bill would have taken the final rescission decision away from an independent third party legal review panel and would have been another way for litigation to needlessly drain away health care dollars.

The need for strong consumer protections must be balanced with the reality that unnecessarily tightening the ability to offer affordable coverage could lead to the loss of access to health care (similar to the current credit crunch) and raise premiums.  

The Governor is committed to true statutory reform that will end unfair rescissions.  These changes, combined with his call for guaranteed issue of coverage, preventive measures and cost containment, will provide real health care reform and keep the individual market affordable for all.

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