State Agency Orders Health Insurers to Reinstate Some Policies

A state agency that regulates health maintenance organizations will review thousands of health insurance policies to see whether they were wrongly cancelled. The Department of Managed Health Care says it's already determined that Kaiser, Anthem Blue Cross, and Blue Shield improperly dropped more than two dozen policies. The agency has ordered the companies to immediately reinstate those policies and reimburse the customers' medical costs. KPCC's Steve Julian spoke with Cindy Ehnes, director of the Department of Managed Health Care.

Steve Julian: A state agency that regulates HMOs will review thousands of health insurance policies to see whether they were wrongly cancelled. The Department of Managed Health Care says it's already determined that Kaiser, Anthem Blue Cross, and Blue Shield improperly dropped more than two dozen policies. The agency has ordered the companies to immediately reinstate those policies and reimburse the customers' medical costs. Cindy Ehnes is director of the state Department of Managed Health Care. What did you find in those 26 policies that led you to order the reinstatement?

Cindy Ehnes: Well, we conducted a very careful, systematic investigation into the rescission practices of the five largest health plans that offer individual insurance coverage in California. In three of the health plans whose surveys have been completely concluded, it was obvious in these 26 instances that there was no reasonable argument that could be made that the applicant had deliberately misrepresented their health history, or that the upfront underwriting had been done properly. So in those 26 cases, I have order immediate reinstatement in order to get that coverage reinstated as quickly as possible and to insure that individuals' medical claims have been paid.

Julian: Now in the past, health insurers have argued that they have a right to drop individual policies when a customer puts down the wrong information on an application, even if it's a mistake. Now Kaiser said it has suspended the practice while waiting for more clear guidelines from the state. When do you plan to release those guidelines, and what should they say?

Ehnes: Well, the, first of all, you know, again, Kaiser has in fact stopped their rescissions and awaiting guidance, PacifiCare only cancelled policies, they do not rescind, and so there are some differences there. But the guidelines that we are looking at are going to be developed in conjunction with the health plans, and in conjunction with consumer representatives, to ensure that there is a fair process. So we'll be looking at simplified application forms.

Again, one of the biggest problems that you encounter in this application is you have a non-medical person responsible for the accurate and full reporting of medical information. So we need to simplify the applications, we need to ensure that there is notice of when an individual is being investigated, and that that individual has a right to appeal. Some of these things are within current law, and then the governor is proposing that, to work with the legislature to incorporate practices that are perhaps outside of the current law, to insure again that there is a fair process, and that no person that's innocent will have their coverage rescinded.

Julian: An arbiter is going to review thousands of policies. How many of those do you think could be reinstated, and how long will this process take?

Ehnes: Well, again, we don't know the entire universe of policies that have been rescinded since 2004, since our investigation used a sampling of those rescission cases, and not the full universe. So we have to identify that in order to really have a handle on how long it will take. We will be moving as expeditiously as possible.

This is a front burner concern to us, and we of course are making that a front burner concern to the health plans to get this process moved as quickly as possible, and perhaps to prioritize those cases in which we initially identify that we think the circumstances potentially warrant reinstatement. Again, consumers are responsible to provide accurate information, and so that is why our process is to allow a fair review of their application, and possible omissions or misstatements, to insure that an innocent person doesn't have their coverage rescinded.

Julian: Cindy Ehnes is director of the state Department of Managed Health Care. Thanks very much.

Ehnes: I'm pleased to be on, thank you.

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