California Rescission Settlement Benefits Few Consumers

The Associated Press reports on a new California state assembly report that found fewer than 200 people out of the more than 6,000 affected have taken advantage of benefits won by a settlement between state regulators and health insurers that dropped sick policyholders.

"More than 6,000 Californians were subject to rescissions by the five largest insurance companies between 2004 and 2008, according to settlement agreements between the regulators and the insurers." The settlements required the five insurance companies to "pay fines ranging from $50,000 for PacifiCare to $10 million for Anthem Blue Cross, and they required insurers to allow the policyholders to be reinstated under new policies" (Mohajer, 3/9).

San Francisco Chronicle: According to the Department of Managed Health Care's Assembly Committee on Accountability and Administrative Review, just five percent of consumers who were dropped accepted new coverage, and less than three percent went through the process of getting their money back. The committee will hold a hearing today on the issue. Critics say the "excessively bureaucratic" process of getting their money back barred many victims from taking advantage of what they were owed in the settlement (Colliver, 3/10).

Los Angeles Times: The report given to the committee overseeing the hearing today "was prepared by Bryan Liang, director of the Institute of Health Law Studies at the California Western School of Law, and based on data from the regulators. It concluded that so few eligible consumers obtained new coverage because the settlements were too complicated and because the cost of the new coverage was too high."

But Dept. of Managed Healthcare's spokeswoman Lynne Randolph says their actions have had positive effects: "As a result of DMHC actions, the number of rescissions industrywide has decreased significantly since 2005, millions of dollars have been assessed against health plans, thousands of consumers have been offered an opportunity to obtain coverage and reimbursement, and reforms have changed the practice of rescissions industrywide. It is difficult to know why many consumers chose not to participate" (Girion, 3/10).

Meanwhile, in other insurance company news, Business Week reports that Connecticut Attorney General Richard Blumenthal sent a letter to U.S. Secretary of Health and Human Services Kathleen Sebelius to inform the department of his investigation into Anthem Blue Cross & Blue Shield's "potentially anticompetitive practice that may raise rates." According to Business Week, Blumenthal claims that the insurer "may constrain competition through contracts that require that the insurer receives hospital discounts at least as favorable as any provided to a competitor."

"As a result of Anthem's practices, competitors are forced to pay more, hospitals are forced to accept less from Anthem -- and consumers are the ones paying," Blumenthal's statement said. Anthem responded: "We have no reason to believe that any provision in our hospital contracts is in violation of applicable law" (Freifeld, 3/8).