Health Insurance Rescissions Reform Opposed by Legislators Receiving More Money from Industry

February 25, 2010 - In September 2009, the California State Legislature passed a bill that prevents health insurers from rescinding policies for any reason, after the first 24 months of coverage. For the Senate floor vote, those voting with the health insurance industry received on average $13,195 from the three main opponents of the bill, Association of California Life & Health Insurance Companies, California Association of Health Plans and California Association of Health Underwriters, in the 2006 and 2008 election cycles. This amount is 2.5 times as much as the $5,323 received on average by those voting Yes on the bill. For the Assembly floor vote, those voting No received on average $5,901 from these three organizations in the 2008 election cycle: 2.6 times as much as the $2,238 received on average by those voting Yes. Both votes were along party lines.

According to the AB 108 bill analysis, supporters argued that the bill will prevent insurers from finding an excuse to rescind a patient's health insurance coverage at times when patients have the greatest need. Health insurers have been accused of sometimes using rescissions as a way to simply not pay for health care services. In one notable case, a breast cancer patient was left with $129,000 in medical bills after her insurance company canceled her coverage. She had to stop undergoing chemotherapy for months. The insurance company justified the rescission, claiming that if the patient had disclosed her true weight and pre-existing heart condition on her original insurance application they would not have issued her a policy. An arbitration judge ordered the company to pay $8.4 million in damages. The California Association of Health Plans claimed that the bill will increase fraud and abuse by patients that provide false information on their insurance applications.

Governor Schwarzenegger signed the bill the same day he vetoed two other bills on health insurance rescissions: AB 2, which would have set up an independent review process for insurers seeking rescissions and AB 730, which would have imposed fines for unlawful rescissions and post-claims underwriting.

MAPLight.org reported similar findings on a recent Senate floor vote to implement single-payer health coverage in California. Most of the same Senators voted against it and the industry opponents included many health insurance and HMO companies and associations.

Methodology:

Campaign contributions data provided by the National Institute on Money in State Politics (NIMSP), and includes state Senate and Assembly campaign contributions from the Association of California Life & Health Insurance Companies, the California Association of Health Plans, and the California Association of Health Underwriters. Date range of contributions: 2006 and 2008 election cycle contributions (January 1, 2005-December 31, 2008) coded by NIMSP as of January 22, 2010; Assembly totals only include the 2008 election cycle (January 1, 2007-December 31, 2008). Votes and bill analyses for AB 108 are recorded in the Office of Legislative Counsel's LegInfo database.