"I believe that unfair rescissions are a deplorable practice," wrote Governor Schwarzenegger when he vetoed the bipartisan legislation in 2008 that would end unfair rescissions.
In his State of the State address early last year, Governor Schwarzenegger shared the story of Todd, a victim of rescission. After being diagnosed with lymphoma, Todd, who was covered by his wife's insurance plan, was rejected because "he weighed less than he did when he applied for the insurance." He died eight months later without insurance coverage.
The Governor pledged in his speech that "We are taking action so what happened to Todd will not happen to any other Californian." Yet despite a clear opportunity to right that wrong, he has not taken action and horrific experiences like Todd's continue unabated.
Governor Schwarzenegger once again will have the opportunity to correct this abusive practice by signing Assembly Bill 2.
The insurance industry has made billions of dollars from their practice of rescission -- unfairly canceling health insurance policies with little to no oversight prior to cancellation.
Even if an insured family has been paying their premium on time for years, there are no protections for the consumer. Insurance companies rescind a policy by arguing that a consumer lied or did not provide the adequate information when they applied for health care coverage. There is no oversight of their decision: the insurer acts as judge and jury.
Real stories from individuals and families across California and the nation have shown that insurance companies begin a thorough investigation of a consumer's health history after the patient gets sick. In other words, insurance companies will gladly accept a consumer's monthly payments as long as they are healthy.
Since 2007, the California Department of Managed Health Care (DMHC) has restored coverage for 1,092 Kaiser Permanente consumers, 85 Health Net consumers and 56 UnitedHealth/PacifiCare consumers due to unfair rescissions. At the same time, the California Department of Insurance entered into settlements with Anthem Blue Cross, Blue Shield and Health Net. Even after multi-million dollar settlements with every major insurer in California, the practice of rescission is still left to the discretion of the insurance companies.
For over two years, I have fought to prevent wrongful rescissions by health insurers.
Physicians, patients, consumer advocates and others have been working with me to address this shameful practice. I introduced AB 2 to protect consumers from being stranded by their health insurer and to shift the burden from the consumer to the insurance company.
AB 2 requires that insurance companies get approval from the Department of Managed Health Care or the California Insurance Commissioner prior to rescinding a policy. Most important, the bill requires that a patient keep their coverage while this independent review is performed.
The bill has faced strong opposition from the health insurance industry. In the last days of the legislative session, I battled an army of lobbyists that made AB 2 one of the top lobbied bills in Sacramento.
As Consumer Watchdog noted, "Without AB 2, insurers will continue to rescind coverage even if patients honestly filled out their application for coverage."
The California Medical Association wrote, "Despite hopes for health care reform at the federal level, we simply cannot and should not wait for the federal government to act on this issue. California has the opportunity to be a leader and set the bar for how states can reign in this despicable practice."
Outrageous examples of rescissions abound. Individuals who have been diagnosed with cancer are notified that their coverage is rescinded just when they need it the most. New mothers have been told that they and their baby no longer have coverage even after receiving prenatal care. In California, there are nearly 1,000 rescissions each year -- 1,000 people and their families who experience serious medical conditions while battling their health insurer instead of their illness.
In Washington, DC earlier this summer, top executives of the three largest insurers - UnitedHealth's Golden Rule Insurance Co., Assurant Health and Wellpoint Inc. - appeared before the Congressional Subcommittee on Oversight and Investigation and testified that they will not confine the cancellations to those consumers who commit intentional fraud.
During the hearing, the three companies were shown to have canceled the coverage of more than 20,000 people, which allowed the insurers to avoid payment of more than $300 million in claims over a five-year period. In fact, several insurance companies gave bonuses to employees based on how many claims they avoided through rescission. This is the very definition of putting profits before people.
Even Republican Congressmembers blasted the insurance companies. Congressman Joe Barton (R-Texas) stated, "I understand that there is a rule of reason, but again, if somebody inadvertently omits something or there is something that is not material to the claim, that claim in my opinion should be paid, end of story."
California can lead the nation once again by removing the insurance industry's power to impose a death penalty on health insurance coverage and the care it is supposed to provide. If Governor Schwarzenegger fails to sign AB 2, your coverage will continue to depend on the sole judgment of insurance companies when you or your family members get sick.