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California governor signs ban on health insurers’ rescission reward practice

Los Angeles Times, July 23, 2008

California Gov. Arnold Schwarzenegger has signed into law a ban against health insurance companies rewarding employees with bonuses for canceling or limiting a patient's coverage. The law is part of efforts to curtail the practice that the industry has defended as a little-used guard against fraud that helps control costs. Critics contend that insurers use confusing applications for individual policies to trap people into making mistakes that can later be used against them. When a policyholder gets sick, insurers scour old medical records looking for an undisclosed condition or symptom to use to justify cancellation, the critics say.