California Health Insurance Rescissions: Trial Lawyers Lose Out?

I’ve written a lot about the political gyrations around California health plans “rescinding” policies of individual policyholders. (Most recent post in the thread here.)

A refresher: regulators, legislators, and the media piled onto the plans for “post-claims underwriting”. That is, plans asked overly complicated questions on the applications, wrote the policies, and collected the premiums, but did not do real underwriting until a policyholder submitted expensive claims. Then they “found” substantial misrepresentation on the application and rescinded the policToday, Health Net has announced an agreement with the Insurance Commissioner to reinstate 926 policies, pay $3.6 million in penalties, and reimburse $14 million in outstanding medical claims.

Of course, any individual can decide whether they want to accept reinstatement of their policy under this settlement, or retain their legal right to sue. But this is not good enough for California’s ambulance-chasing trial lawyers and their advocate, Los Angeles City Attorney Rocky Delgadillo. The Los Angeles Times and the Los Angeles Daily Journal (subscribers only) report that these worthies will apply to prevent Health Net from communicating the settlement to policyholders, until the trial lawyers can get it thrown out of court.

The reason? The settlement doesn’t do enough for “economic losses and emotional distress” (not to mention lawyers’ wallets). So, policyholders will be forced to go for months (years?) without resolution of their medical claims.

How’s that for economic loss and emotional distress?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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