There is a growing controversy in California over the cancellation of individual health insurance policies. Kaiser Insurance was recently ordered by the Department of Managed Health Care to reinstate the insurance coverage of a patient in Northern California after being ruled to have illegally canceled the policy. This is the first time that state regulators have ordered a reinstatement of an insurance policy.
The ruling by the health care department against Kaiser Foundation Health Plan is only the second time the state has sided with a consumer in a case over a canceled policy. It is, however, the second time in less than a month that an illegally canceled policy has had action taken against it. In the first case Blue Cross was fined $200,000 for rescinding a woman's policy in Southern California.
Currently the agency is investigating a number of complaints against Kaiser for improper policy cancellations. The case of the Northern California woman with Kaiser Insurance is an example of the problem with individual insurance policies over group coverage. With individual plans insurers can deny policies because of a preexisting condition or health problem. This is a big difference from group health insurance plans where policy holders cannot be denied coverage.
Many insurers like Kaiser believe they are able to revoke the coverage of a policy if the insurer would have declined an application initially because of a mistatement or omission from a consumers application. Consumer lawyers and health care regulators do not agree because California law prohibits insurers from revoking coverage for innocent mistakes.
