Asian Journal- The Filipino-American Community Newspaper

THE California Department of Insurance (CDI) has published a new set of regulations governing the rescission of individual health insurance policies. "Rescission," as we have discussed in prior articles, is the insurance company’s practice of canceling an insurance policy after a claim for benefits has been made. The insurance company conducts what is called "post claims underwriting." Under this practice, it reviews the insurance application (long after it has issued the policy) in order to find undisclosed or incorrect information, which it then uses as a reason to cancel the policy. This usually occurs when an expensive claim is made on the policy.

Not surprisingly, this practice has been the source of problems for many policyholders who had just accumulated a pile of expensive medical bills. At times, in the middle of expensive medical treatments for serious or life-threatening illnesses, insurance coverages were suddenly cancelled. These cancellations become even more alarming when considered in the light of recent reports showing that individual bankruptcy filings were caused by the inability to pay medical bills.

In a press release early this month, CDI’s Commissioner stated that "Consumers deserve to have their insurance companies hold up their end of the deal, paying out claims and not canceling coverage when it’s needed most." The regulations are billed as California’s first-ever regulatory steps to prevent the industry practice of unfairly rescinding health insurance policies.

The new regulations will seek to do the following:

Set clear and rigorous standards that insurers must meet before they issue a health insurance policy. Insurers must do their underwriting job before they issue the policy.

Require insurers to prove that they have met ALL of the underwriting standards before they can consider rescission.

Put an end to lightweight sloppy underwriting if insurers want to keep the right to rescind.

Require insurers to be 100% sure that an individual knew the answer to a health history question and failed to provide it before considering rescinding that person.

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