Dept of Insurance Press Release - 

Aug. 20: Sacramento, Calif., - The California Department of Insurance issued the following press release:
Poizner Calls Insurers' Lawsuit "Appalling" in Attempt to Continue Illegal Rescissions. Insurance Commissioner Steve Poizner today responded to an insurance industry lawsuit to block regulations that prevent the practice of unfair rescissions in the individual health insurance industry.

"I find it unconscionable that insurers would sue to keep the Department from stopping the horrific practice of illegal rescissions," said Commissioner Poizner. "Sometimes I think representatives in this industry have their heads permanently stuck in the sand. Illegal rescissions are a repugnant industry practice. In this current environment, this lawsuit is simply short-sighted and morally wrong."

Earlier this year, Commissioner Poizner introduced historic regulations to prevent the practice of unfair rescissions in the individual health insurance industry. Rescissions are retroactive cancellations of coverage after a patient becomes sick with an often expensive-to-treat illness. These regulations, effective August 18, 2010, mark California's first-ever regulatory steps to clarify rescission laws, preventing the industry practice of unfairly rescinding health insurance policies.

Previously, insurance companies took advantage of ambiguity in existing laws to inappropriately rescind health insurance policies for individuals when they need health insurance coverage the most after filing claims for medical treatment. Poizner's regulations would ensure that insurance companies perform all underwriting before accepting a policyholder and receiving premiums. 

The regulations would also prohibit insurers from conducting certain rescission focused investigations after the policyholder becomes sick or injured. The rescission regulations do not prohibit insurers from addressing fraud by health insurance applicants so long as the insurer has done its work in reviewing the application prior to issuing the policy.

Commissioner Poizner has taken a series of decisive steps against improper rescissions since taking office in 2007, cracking down on the three largest individual health insurance companies in the state Health Net, Anthem Blue Cross and Blue Shield for engaging in the practice with enforcement actions and settlements to ensure that these companies do not illegally rescind policies in the future. 

The settlements, which cover 85 percent of the market, will not be affected by this lawsuit. Poizner also obtained offers of reinstated coverage for 4,000 customers whose policies CDI alleges were illegally rescinded.
 


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