Draft Guidance 2470, Concerning Review of Complaints Concerning Health Insurance Policy Rescission or Cancellation, Released by California Department of Insurance

Posted on June 10, 2011 by John LeBlanc

By John M. Leblanc and Jason C. Love

On May 26, 2011, the California Department of Insurance (“CDI”) released a second draft of its Guidance 2470, which is designed to implement various provisions of AB 2470. AB 2470, enacted in 2010, legislated certain aspects of rescission, non-renewal, and cancellation of health insurance policies and health care service plans in California. 

The CDI’s draft Guidance 2470 purports to set forth requirements concerning the CDI’s review of complaints related to the cancellation, rescission, or non-renewal of a health insurance policy. T

he draft Guidance includes, among other items, provisions concerning the notice health insurers are required to provide to policyholders about the CDI’s review process and information concerning the mechanisms for the review process. 

The draft Guidance also purports to enumerate the factual showing required of health insurers in order to demonstrate that a cancellation or rescission is lawful.

Finally, the draft Guidance requires health insurers to continue to provide coverage to the policyholder until such time as the CDI makes a decision on the lawfulness of a cancellation, rescission, or non-renewal following the CDI’s receipt of a valid complaint from the policyholder.

As the public comment period on draft Guidance 2470 closed on June 6, 2011, it is anticipated that the CDI will issue its final version of Guidance 2470 in the near future.

 

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California Department of Managed Health Care Releases Draft Guidance Concerning SB 1163

Posted on April 26, 2011 by John LeBlanc

By John M. LeBlanc and Jason C. Love

On April 22, 2011, the California Department of Managed Health Care (“DMHC”) released draft Letter No. 8-K, which is designed to provide health care service plans with guidance concerning SB 1163. This follows the California Department of Insurance’s (“CDI”) release on April 5, 2011, of Guidance 1163:2 concerning SB 1163.

SB 1163, effective January 1, 2011, amended the California Health and Safety Code and the California Insurance Code to provide for review of rate increases by health care service plans and health insurers for purposes of determining whether the rate increase is unreasonable. 

SB 1163 was adopted in response to a provision in the federal Patient Protection and Affordable Care Act (“PPACA”) that requires health care service plans and health insurers’ rate increases to be reviewed by the federal government to determine whether the rate increase is unreasonable, unless a state has established its own rate review process. The key implementing provisions of SB 1163 are located at California Health and Safety Code Sections 1385.01 to 1385.13 and California Insurance Code Sections 10181 to 10181.13. 

California Health and Safety Code Section 1385.08(a) states that the DMHC, “may issue guidance to health care service plans regarding compliance with this article.” This tracks the language found in California Insurance Code Section 10181.9(a), which states that the CDI, “may issue guidance to health insurers regarding compliance with this article.” 

Both Health and Safety Code Section 1385.08(a) and Insurance Code Section 10181.9(a) exempt the DMHC and the CDI from following the formal procedures employed for the adoption of regulations in California when issuing guidance concerning compliance with Health and Safety Code Sections 1385.01 to 1385.13 and Insurance Code Sections 10181 to 10181.13. 

Guidance 1163:2 issued by the CDI purports to define the factors the CDI will consider in determining whether a rate increase is “unreasonable” in the individual and small group markets, in addition to attempting to implement certain procedural aspects of SB 1163 for these markets. 

A comparison of the DMHC’s draft Letter No. 8-K with the CDI’s Guidance 1163:2 reveals that the DMHC has preliminarily adopted many of the provisions contained in the CDI’s Guidance, without modification, and may consider some of the other factors contained in the CDI's Guidance when making reasonableness determinations for these markets.

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Health Care Service Plan Not Liable for Provider's Failure to Diagnose Illness

Posted on May 11, 2009 by Barger & Wolen LLP

Watanabe v. California Physicians' Service, 169 Cal. App. 4th 56 (2008)

On February 25, 2009, the California Supreme Court denied a petition to review the Court of Appeal decision in Watanabe v. California Physicians' Service, 169 Cal. App. 4th 56 (2008). This decision let stand the opinion by Judge Flier which held Health Care Service Plans and plan providers are separately liable for their own acts or omissions under the Knox-Keene Health Care Service Plan Act of 1975 (the “Act”), notwithstanding the delegation of duties from one to the other.  Blue Shield of California, a Health Care Service Plan under the Act, delegated to the plan provider the task of initially determining whether a particular service or treatment was medically necessary (what is called a “utilization review”). Plaintiff sued Blue Shield on the grounds that it wrongfully delegated the utilization review to the plan provider and, as a result, should be vicariously liable for the provider’s failure to diagnose the Plaintiff’s brain tumor. The provider settled with the Plaintiff before trial which continued against Blue Shield. 

The California Court of Appeal rejected the Plaintiff’s arguments and held that (1) the Act permitted Blue Shield to delegate utilization review to a plan provider, and (2) the Act unequivocally precluded imposition of vicarious liability against Blue Shield for the plan provider’s acts or omissions. The Court of Appeal agreed with the trial court which instructed the jury that Blue Shield and the plan provider was each liable for its own acts and omissions. Plaintiff argued that the third sentence of The Act at section 1367 imposed vicarious liability on Blue Shield for the plan provider’s acts or omissions. Section 1367 states:

A plan, any entity contracting with a plan, and providers are each responsible for their own acts or omissions, and are not liable for the acts or omissions of, or the costs of defending, others.  Any provision to the contrary in a contract with providers is void and unenforceable. Nothing in this section shall preclude a finding of liability on the part of a plan, any entity contracting with a plan, or a provider, based on the doctrines of equitable indemnity, comparative negligence, contribution, or other statutory or common law bases for liability.

 

The court clarified this section, noting “under the third sentence an entity that has committed an act or omission for which it is liable remains liable for that act or omission, even if it shares liability with another entity.” However, the first two sentences of section 1367 are “unmistakably clear in precluding the imposition of vicarious liability.” 

Judicial Opinion Available Here

 
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