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Insurance Industry Sues to Halt Anti-Rescission Rules in CA

Cheryl Clark, for HealthLeaders Media, August 20, 2010

Poizner disagrees. He said the new regulations would ensure that insurance companies do more work themselves in the process of underwriting before accepting a policyholder and receiving premiums. And, he emphasized, the new regulations do not prohibit insurers from addressing fraud by health insurance applicants so long as the insurer has done its work in reviewing the application prior to issuing the policy.

Wiebe, however, said the insurance industry only filed the lawsuit as a next step after the negotiation process with the department failed.  "The decision to file this lawsuit was made after careful consideration by ACLHIC member companies," he said.  "Every issue raised in the lawsuit was discussed with the Department at various stages of the rulemaking process and in good faith discussions with Department staff. ACLHIC took this action when the regulations failed to address those concerns."

The state's new regulations go further than federal anti-rescission laws.

For example, they will, for the first time, allow a health plan applicant to indicate when he or she is unsure of or cannot remember the answer to a particular health history question. That rule also shifts more of the burden to insurers to not rely solely on an applicant's self-reported health history in making a decision about whether to sell the applicant a policy.

"To the extent that such response choices impede the insurer's ability to apply its medical underwriting guidelines, the insurer shall pursue alternative methods of obtaining such information, including, but not limited to telephone interviews, medical records or other sources of information," the regulations state.

They also will:

  • Restrict health condition and history questions on applications to those that are necessary for medical underwriting.
  • Require all questions on health insurance applications be clear, specific and understandable.
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