On August 18, new regulations go into effect in California that areaimed at preventing illegal cancellations of health insurance policies.
Rescission, which is the practice of cancelling healthinsurance policies for mistakes on the health insurance applications, evenminor mistakes, is targeted in the new regulations. According to thegovernment, rescission is estimated to add $300 million in profits to thehealth insurance industry.
The new regulations require questions on a health insuranceapplication to be clear, specific and understandable. The applications are notallowed to use double-negatives or some types of compound questions. Insurancecompanies will be required to take into account the level of knowledge anaverage individual with no medical training may have when formulating thequestionnaires. Questions on the application must be relevant to theunderwriting process. In addition, applicants must be allowed to check thatthey are unsure or cannot remember to questions on the application. Consumersmust also have the right to respond during rescission investigations.
The California Department of Insurance is going to publish anew approved questionnaire for insurance companies to use in obtainingapplicants’ medical history. Insurance companies that decide not to use thepre-approved questionnaire cannot use unapproved questionnaires as the basis ofa rescission later.