Today I filed a lawsuit against Kaiser Foundation Health Plan demanding that Kaiser stop its illegal practice of rescinding health insurance policies. The lawsuit was filed on behalf of all California residents whose coverage Kaiser rescinded in the last four years. We are seeking an injunction requiring that Kaiser immediatley stop its illegal rescission practice and reinstate all of the people whose coverage it wrongfully rescinded in the past.
California health insurers have been engaged in the wrongful act of retroactively rescinding people’s health insurance for years. For those of you not familiar with this practice, it goes something like this: When you apply for individual coverage, you are required to complete an application. The application contains several broad, ambiguous, and technical questions regarding your health history. For example, some applications ask if you have ever had a headache. Assuming you make it through the application process, you had better hope you don’t need coverage. If you do, the insurance company likely will scour your medical records looking for any “symptom” of that condition. If they find even a hint, they likely will retroactively rescind your coverage, leaving you without any insurance. And to top it off, they will send you a bill for the “non-member price” of the healthcare you received while you were insured by them.
For example, in the case we filed today, Kaiser claimed that the individual should have know that freckles on his are were a symptom of skin cancer. Because he did not disclose that he had an “undiagnosed skin lesion” at the time he applied for coverage, Kaiser rescinded his health insurance after he was diagnosed with cancer. Kaiser also threatened to “refer this incident to law enforcement for further action.”
Lisa Girion at the Los Angeles Times has written several outstanding investigative pieces about health insurer’s practice of rescinding coverage. For example, she reported that HealthNet paid bonuses to its employees based on the number of policies they were able to rescind:
Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.
Four months ago, the Foundation for Taxpayer & Consumer Rights wrote a letter to the California Department of Managed Health Care, the agency charged with regulating health plans. The FTCR said:
It has been nearly a year since your Department indicated that the practice is rampant in California among all insurers but only one other company, Kaiser, has even been fined for illegal cancellations. Reports investigating the practices of other companies have been delayed.
Patients cannot afford for you to allow another company’s rescission policy to leave more Californians uninsured, uninsurable and facing unpayable medical bills. The longer your Department delays the draft rules, the more complicit your Department becomes in the illegal behavior.
Yet, illegal rescissions continue to this day.
Kaiser’s rescission practice is flatly illegal. California law prohibits insurers from engaging in “post-claims underwriting,” which is what Kaiser is doing. Moreover, California law prohibits Kaiser from relying on any statements made in an application that is not attached to the policy. Kaiser does not attach copies of applications to its policies, so it is prohibited from rescinding coverage based upon statements made in them.