Insurers Admit Need for External Review of Policy Cancellations
[Posted 03/03/08]

After more than two years of negative press coverage and unfavorable court and regulatory decisions, two major California health insurance companies last week announced their support for external review of their decisions to rescind or cancel policies. CMA and Assemblymember Hector De La Torre both warned that any external review process must have teeth and pointed to CMA-sponsored AB 1945 as the ideal way to provide oversight of health insurers’ rescission practices. The bill (De La Torre, D-South Gate), would require health insurance companies to seek approval from regulators before canceling a patient’s policy.

In an interview in the Los Angeles Times last week, Health Net CEO Jay Gellert pledged to stop all cancellations until an external review process could be established to approve all cancellations. Blue Cross of California issued a press release over the weekend saying it was “developing an outside third-party review process for all rescission cases.”

If passed into law, the bill also would require regulators to revoke the license or otherwise discipline an insurance company for retroactively canceling a policy. Last year, CMA and De La Torre teamed up to pass AB 1324, which prohibited health insurers from denying payment for treatment which they had already approved.

Blue Cross has taken a series of steps over the past two years to show the public it was policing itself after media exposed its practice of taking away individual policies after the patients submitted claims for treatment. But the problems have continued, most recently with reports in the past two weeks that doctors received letters asking them for information about their patients’ medical histories so that Blue Cross could cancel the policies and not pay the bills.

Outraged at this intrusion into the physician-patient relationship, CMA asked the Department of Managed Health Care to step in and stop the letter. “We’re outraged that they are asking doctors to violate the sacred trust of patients to rat them out for medical information that patients would expect their doctors to handle with the utmost secrecy and confidentiality,” CMA President Richard Frankenstein, M.D., told the Los Angeles Times. Within hours of the story breaking in the media, Blue Cross said it would no longer send out the letter.

Contact: Ned Wigglesworth, 916/444-5532 or nwigglesworth@cmanet.org.