The California Department of Managed Care ordered Kaiser Foundation Health Plan to reinstate a patient whose health care was cancelled because Kaiser claimed she had not revealed essential information on her application. While cancellations such as this are relatively common, in this case, the patient had previously been a member of Kaiser through a group plan. During that time, she was treated at Kaiser for arm and neck pain, which she did not disclose on her application for individual coverage because the treatment and prescription had all been done within the Kaiser system. In this case, there was no willful misrepresentation of health history on the application, making Kaiser’s cancellation improper.

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This is the second action the Department has taken against major health coverage providers in the last two months. In September 2006, it ordered Blue Cross to pay $200,000 for wrongfully canceling coverage, but it didn’t order that person reinstated with Blue Cross. The Department is considering complaints against at least six California companies for wrongful cancellation, and a representative has stated that they intend to take further action.

Private lawsuits have also been filed against Blue Cross, Blue Shield, and Health Net. Blue Cross recently settled 70 lawsuits, but the suits against the other companies are still pending. The settlements with Blue Cross are confidential, but it was revealed that all medical bills will be paid.

The issue in dispute is whether an insurance company must show that a mistake in an application was intentional before it can cancel a policy. Consumer and patient advocates and the Department of Managed Care say insurers must show intent to deceive, but the courts have not yet ruled on this question.

Critics have argued that fines in the amount of $200,000 will not deter insurance companies from wrongful terminations. Because the settlement agreements are confidential, it’s unclear whether the amounts are large enough to stop them from canceling policies of people who have made honest mistakes.

For more information about the Kaiser cancellation, see Regulators Add Kaiser to Major Industry Investigation.

Kaiser Permanente wrongfully cancel your individual policy? You may have a lawsuit. Click here, for a top rated law firm to evaluate your legal rights. [Sponsored Link]