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Consumer Group Calls Regulator 'Complicit' in Illegal Insurer Cancellations; Cites 9 Month Delay for New Regulations to Curb Illegal Practice

Wednesday, August 29, 2007 General News J E 4
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LOS ANGELES, Aug. 28 In a letter sent today a consumer group said California's HMO regulator has become "complicit" in the high-profile health insurance cancellation scandal citing a 9-month delay in bringing new rules to address the widespread illegal practice that leaves patients uninsured, uninsurable and often buried in medical debt.



In December of 2006 the Foundation for Taxpayer and Consumer Rights (FTCR) petitioned the Department of Managed Health (DMHC) care for the new regulations. One month later the DMHC responded, granting the petition and agreeing new regulations were necessary. Though the DMHC has held a hearing on the rules and issued a scathing report citing widespread illegal activity at the state's largest insurer, Blue Cross, no draft regulations have appeared.



In the letter FTCR wrote:



"It has been nearly a year since your Department indicated that the practice is rampant in California among all insurers but only one other company, Kaiser, has even been fined for illegal cancellations. Reports investigating the practices of other companies have been delayed.



"Patients cannot afford for you to allow another company's rescission policy to leave more Californians uninsured, uninsurable and facing unpayable medical bills. The longer your Department delays the draft rules, the more complicit your Department becomes in the illegal behavior.



"Blue Cross enrollees need you to hold Blue Cross accountable. That accountability must include the new regulations. All Californians need you to implement the new regulations in order to bar other insurers from following Blue Cross's bad example."



Currently insurers cancel coverage when patients get sick citing so-called "omissions" on a patient's enrollment application - induced by the intentionally vague and misleading questions on the applications - regardless of whether patients intentionally misrepresented their medical histories as the law requires.



Blue Cross has contributed $256,600 to Governor Schwarzenegger who is under pressure from the insurer to remove key consumer protections from his proposed health care plan that would require health insurers to sell coverage to anyone regardless of their health history.



LETTER TO THE DMHC:



Tuesday, August 28, 2007

Ms. Cindy Ehnes

Director

Department of Managed Health Care

980 Ninth Street, Suite 500

Sacramento, CA 95814-2725



Dear Ms. Ehnes,



More than nine months ago the Foundation for Taxpayer and Consumer Rights (FTCR) petitioned you and the Department of Managed Health Care to craft new regulations barring insurers from illegally canceling health insurance policies when patients get sick. It has been eight months since your Department granted FTCR's request yet the regulations have not been released.



Five months ago your Department issued a report finding that out of 90 cases reviewed, Blue Cross violated state law in every case by retroactively canceling policies without determining whether patients "willfully misrepresented" their medical histories. According to a pending class action lawsuit against Blue Cross, Blue Cross rescinded at least 6,000 policies in the last several years. The survey is damning evidence that Blue Cross has put patients at risk of medical bankruptcy by flagrantly violating state patient protection laws and should have cleared the way for tough new rules designed to crack down on the lawbreakers.



It has been nearly a year since your Department indicated that the practice is rampant in California among all insurers but only one other company, Kaiser, has even been fined for illegal cancellations. Reports investigating the practices of other companies have been delayed.

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