Calif. regulators defend rescission settlements

In a report released Tuesday, the state’s Committee on Accountability and Administrative Review said fewer than 200 people went through the arbitration process that regulators enacted to determine if benefits should be restored.

In a legislative accountability hearing Wednesday, Department of Managed Health Care enforcement official Amy Dobberteen said those policyholders who wanted to be a part of the settlements participated. She noted that nine rescissions had been reported since the summer of 2008.

Legislators also urged transparency from health insurance regulators in Wednesday’s hearing in Sacramento, calling for new rules that ensure insurers can’t drop sick policyholders to avoid paying for their care.

Assemblyman Hector De La Torre, D-South Gate, said the assembly’s Accountability and Administrative Review Committee and regulators will meet again to vote on a recommendation.

De La Torre said the recommendation should outline how regulators can report each settlement to legislators and outline a requirement for third-party review of settlements.

The new rules are to be based on previous settlements made by the Department of Managed Health Care and the Department of Insurance. Those departments oversee the individual policies affected by the practice of "rescission,” the health insurance industry’s term for dropping patients from coverage when they try to make claims.

De La Torre is also making a third attempt to pass legislation requiring health insurers to prove a policyholder withheld information or lied to get insurance before dropping them from coverage. Republican Gov. Arnold Schwarzenegger has twice vetoed the bill, saying it benefits trial lawyers more than consumers.