California, health insurers reach agreement to reinstate coverage for some former members

About 3,400 California residents whose health insurance was canceled by Kaiser Permanente, Health Net and PacifiCare soon will be notified that they might be eligible for new coverage and compensation for medical bills incurred while they were uninsured, the Los Angeles Times reports.

The state has been investigating the insurers over claims that the companies scrutinized members' insurance applications for reasons to cancel coverage after they had become ill and filed claims.

Under an agreement with the California Department of Managed Health Care, the insurers will reinstate policies of members whose coverage was inappropriately canceled, regardless of pre-existing medical conditions, and reimburse them for medical expenses. In exchange, the state will close its investigation into the companies' rescission practices. The terms of the settlement are "unprecedented in their ambition to restore coverage," the Times reports.

At a hearing in a lawsuit brought against Health Net on Friday, lawyers representing policyholders expressed concern about a plan for the insurer to notify former members about the agreement, saying that state law requires such notices to go through lawyers. They added that members eventually would receive court-approved notices about developments in the case, which would include a settlement. "Our concern was that it creates tremendous confusion for people to get one notice and then another," Mike Bidart, a lawyer representing policyholders, said. Los Angeles County Superior Court Judge Victoria Chaney scheduled a hearing for Sept. 2 to address the issue. Then late Bidart said he learned that DMHC planned to send the notices. He added, "I'm sure they are doing this because the courts don't currently have jurisdiction over the DMHC."

DMHC Executive Director Cindy Ehnes defended the department's actions and said former policyholders could address their cancellations through the department's process, which would send each case to a third-party arbitrator, or wait for the outcome of a class-action lawsuit. "What we have tried to do is to offer enrollees options," she said. Regulators began mailing notices of potential reinstatement on Tuesday (Girion, Los Angeles Times, 8/13).

Please note: The Kaiser Family Foundation is not associated with the Kaiser Foundation Health Plan, Kaiser Permanente or Kaiser Industries.