California Policy Cancellation Scandal Heats Up As Republican Candidates Propose Health Reform Based On An Individual Health Insurance System

All of the leading Republican candidates for president favor health reform based on the individual health insurance model instead of the more common employer-based system.

Apparently, a number of health insurance companies would like to derail those Republican health reform plans by scaring the heck out of consumers and voters picking the year before the election to hold a policy cancellation scandal.

The latest in this dumber than dumb saga has the California Department of Managed Health Care fining HealthNet for $1 million "for failure to be truthful to state investigators" about paying bonuses for canceling individual health insurance policies.

This issue was the subject of a post last week: Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"

No one is arguing that an insurance company doesn't have the right to cancel a health insurance policy when it is obtained because of fraudulent statements made on the original application. The issue here is that these California health insurance companies (almost all of which operate nationally) are accused of canceling the policy even when the misstatements may have been unintentional and/or immaterial.

Consumers don't always remember every doctor visit or prescription they've had over a period of years and that can later come back to haunt them when they later file a claim and their medical records are scoured for "fraud" at the time of application.

California state law prohibits bonuses being paid to insurance company employees for trying to limit claim costs. HealthNet accepted a consent agreement and said it would no longer link bonuses to policy cancellations.

The state is continuing it's original investigation into Health Net's cancellation policies--this fine is just for the lying part. The California Department of Insurance has a separate investigation going on.

The ongoing investigations over policy rescision include Blue Cross of California (WellPoint), Blue Shield of California, Kaiser, and PacifiCare. WellPoint has already paid a $1.2 million fine and Kaiser a $350,000 fine for improperly canceling coverage.

What better way for the Democrats to undermine Republican health policy proposals than to drag this one out next fall.

Message to the executive suite: WAKE UP!

See a detailed analysis of each of the presidential candidate's proposal in the index to the right.