California Legislature About to Jack Up Rates on Individual Health Insurance
The California Assembly health committee has just voted thumbs-up to two bills that will increase the cost of individually purchased health insurance in the Golden State. Probably the least harmful is AB 2459, which prevents a health plan from rescinding an individual health policy six months after enrolling an individual, no matter what grounds. (Currently, there is no “deadline”, but I understand from sources in the industry that insurers do not rescind after a policy is in force for two years.) I think this is the least harmful because, if an enrollee has fraudulently misrepresented his health status in order to “beat” the underwriting, I expect that he is likely to submit a significant claim within six months. The committee passed AB 2459 by 12-5.
More dangerous is AB 1945, which requires health plans to get permission from a government-appointed 3rd party before rescinding an individual health policy that it believes is fraudulent. It’s kind of like saying a landlord cannot cancel a tenancy without getting the government’s permission. Clearly, by raising the risk of being a landlord (or a health insurer), such a measure would cause rents (or premiums) to increase to compensate for the higher risk. Unfortunately, this bill passed the health committee unanimously.
Obviously, legislators from both parties are appalled at stories of California health plans rescinding individual policies after beneficiaries submit expensive claims. But courts already have the power to prosecute health plans that engage in so-called post-claims underwriting, and have done so.
As I have written before, medical underwriting is expensive, and unless legislators can implement policies that reduce that cost – by allowing, for example, sharing the results of physical exams conducted for the purpose of underwriting, they are simply not addressing the real problem.