The two California entities regulating the healthcare industry--the California Department of Managed Health Care (DMHC) and the California Department of Insurance--announced on Oct. 23 that they would issue joint regulations to protect consumers purchasing health coverage in the individual market, and pledged that they would work together to end the practice of illegal rescissions.
The DMHC has released draft regulations to end illegal rescissions of health insurance policies by major California health plans, and the California Department of Insurance is drafting parallel regulations. The DMHC regulations will clarify existing law, which states that a consumer must willfully misrepresent his or her health history before a health insurance policy can be rescinded. It will also require that health plans conduct medical underwriting before issuing a policy and fully investigate questionable responses on health history questionnaires.
Since late 2005, the DMHC has been investigating the underwriting practices of five of seven health plans offering individual policies in California for engaging in the illegal practice of post-claims underwriting. To date, Blue Cross of California was fined $1 million in March 2007 for routinely rescinding health insurance policies, and had previously been fined $200,000 in September 2006 for illegally rescinding the health insurance policy of one of its members. Kaiser Foundation Health Plan has also been fined a total of $325,000 for two illegal rescissions. Read the press release.
