News: 2010 Press Release

Insurance Commissioner Steve Poizner announced today that his new regulations designed to combat illegal rescissions will go into effect on August 18.

"Keeping your health insurance can literally be a matter of life and death, and I have zero tolerance for insurers who use pretexts to illegally rescind policies," said Commissioner Poizner. "These tough regulations embody my commitment to enforce the law and to protect consumers who buy medically underwritten insurance coverage."

Currently, health insurers may only rescind policies under very specific, limited circumstances defined by law and regulations. In the past, some insurers have exploited vagueness in these laws to improperly rescind health insurance policies. These regulations clarify the law to protect consumers from these illicit practices and set out specific steps insurers must take before they can legally rescind. All insurers must file revised health history questionnaires that comply with the new regulations and receive Department approval.

The approval of these regulations is another success in the Commissioner's fight against illegal rescissions. Since taking office in 2007, Commissioner Poizner has cracked down on insurance companies that CDI believes illegally rescinded policies. In settlement agreements with insurers representing 85 percent of the individual market, the Commissioner established firm guidelines for avoiding illegal rescissions in the future. The Commissioner also required offers of reinstated coverage for 4,000 consumers who allegedly had their policies rescinded illegally and required reimbursement of out of pocket expenses to harmed consumers.

The regulations do the following:

• Prohibit insurers from rescinding policies when they are not in compliance with specified underwriting practices regulations.
• Restrict health condition and history questions on applications to those that are necessary for medical underwriting.
• Require all questions on health insurance applications be clear, specific and understandable.
• Require use of new and improved health history questionnaires approved by the Department before an insurer can rescind.
• Allow consumers to indicate that they are unsure of or cannot remember the answer to a particular health history question.
• Require that agents attest if they help applicants with a health insurance application.
• Prohibit confusing phrasing of application questions like double-negatives and certain compound questions.
• Require that consumers be given a copy of their application to check for discrepancies.
• Require that insurers not rely solely on self-reported health history when possible.
• Prohibit insurers from conducting certain rescission-focused investigations long after becoming aware of a possible misrepresentation or omission by the applicant. Also prohibits insurers from seeking information outside the scope of such an investigation.
• Require that insurers give consumers the opportunity to respond during rescission investigations, and that insurers must listen to consumer-provided information.
• Require that insurers identify and resolve any reasonable questions arising from the application. Insurers must document their effort to resolve these issues and make those documents available to the Commissioner.

The regulations were approved by the Office of Administrative Law on July 19, 2010. A copy of the regulations may be viewed by selecting this link.