Rogue Regulator Wrapped Up In Own Red Tape?

The Los Angeles Times is disappointed in the slow pace of health regulatory action.  Californian health insurers have the privilege of serving two regulators: the Department of Managed Health Care and the Department of Insurance.  Insurers have some choice between the two, but it's still a challenging regulatory environment.

In January, when Gov. Schwarzenegger launched his health reform proposal, it included mandating "guranteed issue" and "community rating" for all private health insurance.  Currently, health policies bought by individuals are free from this rule, which is why individual health insurance in California is relatively affordable.  Guaranteed issue and community rating cause high premiums because people can wait until they become sick to buy health insurance, but the governor nevertheless wanted to take away Californians' incentive to get insured when they are healthy.

Conveniently, the Department of Managed Health Care concurrently reported an investigation of "retroactive cancellations" of individual health insurance policies issued by major insurers like Blue Cross of California and Kaiser Permanente.  This investigation lured a willing media into telling people that if they bought individual health insurance and eventually had expensive claims, the insurer would simply cancel the policy on the grounds that they forgot to write their middle name on their original application, or something like that.

The cases highlighted in the media are pretty gray.  For example, Kaiser asked applicants for their medical history, and some did not disclose that they had been seen by Kaiser docs already, on the grounds that Kaiser should have already known that!  Nevertheless, the regulator swang into action.  DMHC fined Blue Cross $1 million, which the insurer is disputing.

Furthermore, on January 29, DMHC had a public hanging (sorry: hearing) and later announced that it would publish new "rules" on such cancellations and recissions by the spring.  It has not done so. It's excuse? Continuing investigations of California's other insurers.

Nevertheless, despite Gov. Schwarzenegger's reforms languishing without legislative sponsorship, DMHC will "still pursue rescission regulations because broader reforms would take time to implement and could be challenged in court."

Yikes! Does DMHC really think that laws can be challenged in court but its own rules cannot? That is has unilateral authority to put the screws to health inurance without legislation?  Scary stuff - DMHC is showing the signs of a rogue regulator, imposing "guaranteed issue" by regulatory fiat, unwilling to await the outcome of health reform by the elected branches.

Californians beware! The price of health insurance is about to go up, whether the politicians say so or not.