The battle over how and when health plans can cancel a patient's insurance policy returned to the Capitol this week as two key pieces of legislation cleared the Assembly Health Committee.
At issue are the rules health insurance companies must abide by before they cancel a patient's health care coverage.
"In the five years that we have records, there have been about 700 rescission per year," says Hector De La Torre, D-South Gate, author of one of the bills passed out of Health Committee this week. "This bill would make it so those rescissions would have to be reviewed by a third party before they can happen."
Under current practice, health plans have the authority to unilaterally rescind a policyholder's insurance if they find there has been a "willful misrepresentation" of the patient's medical history on their initial health care application. De La Torre's bill would force health plans to seek approval from a third-party arbiter before an enrollee's health insurance policy can be revoked.
A number of high-profile cases in recent years have found that health plans have improperly revoked policies from insurance holders for accidental omissions on their health insurance applications.
The Department of Managed Health Care, which regulates Health Maintenance Organizations, released findings last year that showed a review of 90 policy cancellations by Blue Cross were all in violation of state law. The department is currently reviewing the rescission practices of the four other major HMOs in California, and is expected to release those findings in the coming weeks.
Reform advocates and health plan CEOs alike have called for some kind of review process of rescission cases. But that's where the similarity ends. De La Torre says it is important "to come up with a process set up by the DMHC and the (Department of Insurance), and not by the health plans."
When asked why the healthy plans should not have a voice in establishing the review process, De La Torre said, "you can't have the rooster guarding the henhouse."
Nicole Evans, a spokeswoman for the California Association of Health Plans, says insurance providers are already taking steps to reform the rescission process.
The plans "are already stepping forward and making their process for rescinding policies more transparent. It's being addressed," she said. "Some of the health plans are putting an independent process in place right now.
De La Torre said his bill is "entirely reasonable considering the reports that we've seen of rampant mistakes in the rescission process. The bill passed the Assembly Health Committee on a 14-0 vote.
The unanimous, bipartisan support for De La Torre's bill, despite concerns raised from the health plans, underscores the political sensitivity of the rescission issue. Republican Sen. Sam Aanestad, R-Grass Valley, told Capitol Weekly, that he would like to see changes in the way rescission cases are handled and regulated.
"I'm no fan of government regulation, but it seems to me you've got to make some changes," he said.
Another key rescission bill authored by Castro Valley Democrat Mary Hayashi also cleared the committee Tuesday. Hayashi's bill, AB 2549, would alter the state's rescission laws in different ways. Under current law, health plans are allowed to cancel coverage if they find an applicant lied on their initial enrollment application.
But Hayashi's bill would give health plans six months from the time an individual's application is completed to perform an investigation of an individual's medical history. After that time, health plans would be barred from canceling an individual's insurance for any reason.
"This legislation does one thing, it prohibits insurance companies from dropping their patients after six months," she said.
Evans said the association is opposing the Hayashi bill, citing concerns about fraud. "Somebody could commit egregious fraud, and if you don't realize it within 6 months, you are out of luck," Evans said. "There would be no resource for health plans if you have somebody committing fraud."
"If there is a fraud, we are giving them six months to investigate and submit a complaint to the Department of Managed Health Care," Hayashi said. "While the bill doesn't say explicitly how to deal with an applicant who commits fraud, why can't that be caught within the first six months? But if there is something that I am not aware of regarding fraud, I am happy to address it."
At the hearing Tuesday, Chairman Merv Dymally, D-Compton, suggested merging Hayashi and De La Torre's bills together. Hayashi said Wednesday that she would be amending her bill to incorporate a third-party review similar to that in De La Torre's legislation. "I haven't met with Hector on this yet," she said, but "if the bills become one and it is stronger for the insured, then I am more than happy to do it."
Evans also said the bill could have unintended consequences – potentially making it more difficult to receive health insurance, and lengthening the time it takes for plans to process health care applications.
She says her association is closely watching both the Hayashi and De La Torre bills, but it not formally opposing either one as of now.