Third-party review process for rescissions makes sense

Health care reform is a complex and politically-charged issue.   

It seems that the only thing that can be agreed upon today, either at the state or national level, is that our current system is not doing a good enough job of providing Californians with the accessible and affordable care they expect.

 In the past, some have taken an “all or nothing” approach to health care reform, but this has failed to deliver results.  Why?  The problems with health care are not solved by one extreme solution or another.  

I am a believer that an incremental approach can in the end produce much more meaningful reforms for working families than a politically-charged plan.  As we consider health care reforms in 2010, my view is that incremental changes should be the Legislature’s priority, focusing where we can all agree like wrongful rescission.

Last week, the Assembly Committee on Accountability and Administrative Review held a hearing to examine the practice of health insurance companies rescinding coverage for their customers.  In many cases, insurers justifiably use rescission to combat insurance fraud when an enrollee has made intentional misrepresentations.  Fraud forces the cost of insurance to go up for everyone and should not be tolerated.

Unfortunately, in recent years investigations by the state agencies that regulate the insurance industry in California have suggested that some health plans have used rescission to wrongfully deny coverage.

Both the California Department of Insurance (CDI) and the California Department of Managed Health Care (DMHC) conducted rescission investigations in the past five years and found that insurers have engaged in wrongful rescissions.

The investigations resulted in settlement agreements, penalties or other enforcement actions being taken.  More than 6,000 Californians were subject to rescission by the five largest insurance companies between 2004 and 2008.

 Settlement agreements allowed rescinded enrollees a chance to receive new coverage and to recoup some medical costs. Despite efforts by both Departments to track down and inform former enrollees of these options, about 95% of the rescinded enrollees did not participate.

 Based on these results, it would seem that action taken before someone has had their coverage rescinded is the best way to protect California consumers from losing their health care.

One logical approach would be to require an independent review of future rescissions — to ensure the enrollee is not wrongly having their coverage revoked. This would get to the root of the problem and give consumers confidence that the health care coverage they are paying for will be there when they need it most.

 Under this process, an independent, third-party reviewer would review a claim before the rescission process is initiated. This takes the burden off the consumer, who might otherwise have their coverage rescinded by their insurer and then be forced to appeal for an independent review or wait for a settlement to be reached.  Using this process before rescission is initiated would protect the consumer and still allow health insurers to combat fraud.

 Progress on this issue has been made through enforcement. Since the settlements, the number of rescission by DMHC-regulated plans has dramatically reduced.  With some insurers already working to implement the third party review process, it’s time we applied this requirement to all insurers and make it a fail safe for consumers. We could ensure that the 2.6 million Californians who rely on the individual health insurance market and those will use it in the future are always treated fairly.

By taking small steps towards reform, we will make progress in producing a better health care system for all Californians.

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