Kaiser Foundation Health Plan proposes individual policyholder cancellation guidelines

Kaiser Foundation Health Plan on Tuesday announced that it is working with California insurance regulators to develop new guidelines for canceling individual policyholders' coverage, the Los Angeles Times reports.

If the guidelines proposed by Kaiser are approved, managed care organizations would be required to seek the input of individual policyholders before deciding whether to cancel coverage, according to a Kaiser official.

The guidelines are intended to help the health plan determine whether policyholders intentionally provided inaccurate information about their medical histories in order to obtain coverage, according to the Times.

In California, applications for individual coverage, unlike group coverage, can be rejected based on current or past health conditions, and coverage can be rescinded for inaccuracies on an application.

Kaiser proposed the new standard as the California Department of Managed Health Care fined the HMO $100,000 for improperly canceling the policy of an epileptic man whose condition had not been diagnosed by a physician and who was unaware of the condition because it was accompanied by amnesia.

Kaiser had not questioned the man about the alleged omission on his application before canceling coverage. The health plan did not admit wrongdoing in the case but agreed to pay the fine.

The Times reports that Kaiser's position marks "the first sign of a substantive split within the health plan industry on the issue" of cancellation standards for individual coverage. Blue Cross of California, Blue Shield of California and other insurers maintain that they can cancel coverage based on any omission from an application, even if the omission is inadvertent (Girion, Los Angeles Times, 1/3).

Please note: The Kaiser Family Foundation is not associated with Kaiser Permanente or Kaiser Industries.