Bill Implementing Ban on Rescissions is Signed Into Law (September 30, 2010)
Legislation providing patients a vital safeguard to ensure the federal ban on rescissions is followed and enforced was signed into law by Gov. Arnold Schwarzenegger late Thursday, September 30.
AB 2470, authored by Assemblyman Hector De La Torre, D-South Gate, and sponsored by CMA, means plans cannot act as judge and jury whenever they want to cancel a policy. The measure allows patients to appeal insurers’ decisions to retroactively cancel their coverage after they get seriously ill, a practice known as rescission, to the Department of Managed Health Care or the Department of Insurance.
Until a state regulator rules on the appeal and determines whether the cancellation was legal, the patient would retain his or her health insurance. The legislation gives patients an important tool to hold insurers accountable to the ban on rescissions that was part of federal healthcare reform enacted earlier this year. Under the new law, insurers are now allowed to rescind coverage only in cases in which it can prove the patient lied or committed fraud.
“This is a great day for California patients and the doctors who have fought for them,” said Brennan Cassidy, MD, president of CMA. “Thanks to CMA, which pressed this issue both in Sacramento and Washington, insurers must honor their commitment to cover patients and can no longer dump them willy-nilly just to boost their bottom line.”
A 2009 congressional investigation concluded that three insurers used rescissions to systematically cancel more than 20,000 policies over five years, saving the companies $300 million in claims. Rescissions pull the rug out from under patients, ending their insurance coverage and saddling them with huge medical bills when they are at their most vulnerable.
CMA sought to outlaw the conduct since it first came to light, pushing bills each of the last three years. But while the governor refused to sign the legislation, Congress used the same legal standard advocated by CMA and put a provision in healthcare reform that prohibits policy cancellation unless the patient commits fraud or intentional misrepresentation.
This issue first received widespread attention through an investigative series by the Los Angeles Times about California insurers’ practices. AB 2470 follows AB 1945 and AB 2, bills authored by De La Torre and sponsored by CMA, in 2008 and 2009, respectively, that attempted to ban rescissions.