Two Major California Health Insurers to Cease Practice of Policy Rescissions

For several years, health insurers have been strongly criticized for engaging in post claim underwriting and improper policy cancellations, known in the law as “rescissions.” The Insurance Commissioner has even recently regulated the practice.

Now, after this significant criticism and facing tougher federal regulation, two of California’s largest health insurers say they will stop rescinding policies. WellPoint Inc., the parent of Anthem Blue Cross of California, and Blue Shield of California, made the announcement yesterday. WellPoint Chief Executive Angela Braly said in a statement that the company’s “goal is to make reform work for our members and for the country.”

Even before this announcement, several health insurers in California had stopped (or largely stopped) policy rescissions. Under the new federal Healthcare Act, insurers will be limited in their ability to rescind health insurance policies. In 2014, this legislation will require insurers to sell policies to consumers regardless of preexisting conditions. This will effectively preclude the practice of rescissions.

The Los Angeles Times reports that last year, only four such cancellations were reported to the managed healthcare department, down from 1,552 in 2005. Since 2004, at least 5,000 Californians had their insurance policies rescinded by the state’s five largest health insurers — Anthem Blue Cross, Blue Shield, Health Net, Kaiser and PacifiCare. That includes about 3,500 policies regulated by the Department of Managed Health Care and another 1,600 policies regulated by the Department of Insurance.

This is a wise and very practical move by Wellpoint. Let’s see if other insurers who have not stopped the practice follow suit.