California Department of Insurance
Court Rejects Health Insurance Termination Arguments
Rejects health insurers’ challenge to regulation preventing unlawful cancellations of health insurance policies
SACRAMENTO, Calif. – The California Court of Appeal has rejected health insurers’ lawsuit against Insurance Commissioner Dave Jones challenging regulations he issued to protect consumers from unlawful cancellations of their health insurance. The Association of California Life and Health Insurers (ACLHIC) sued Commissioner Jones to invalidate his regulations that protect consumers from having their insurance unfairly terminated, claiming the commissioner lacked the authority to adopt them and that they were inconsistent with statute. In the third of three major appellate court decisions in favor of the commissioner this year alone, the court of appeal ruled against the insurers.
“This is the third major case this year in which an appellate court has rejected a lawsuit by insurers challenging my authority to protect consumers,” said Insurance Commissioner Dave Jones. “In this case, the court of appeal rejected all the health insurers’ arguments challenging regulations I issued to protect consumers from unlawful cancellations of their health insurance policies.”
Among several of the notable victories for consumers in this decision, the appeals court specifically upheld the requirement that health insurers provide a 30-day grace period for policyholders to pay their premium before cutting off their health insurance. During the grace period, the policyholder may still pay the premium in order to keep the policy in force.
“The court rejected the insurers’ argument that they could manipulate their billing cycle to avoid their obligation to provide a genuine grace period,” said Jones. “Californians bought health insurance policies specifying that coverage will continue during the grace period; the court ruled they are entitled to that protection.”
The ruling also affirmed the requirement in the commissioner’s regulations that any time an insurer seeks to terminate coverage under a health policy, the insurer must send the consumer a notice of the consumer’s right to request review by the commissioner. ACLHIC had argued that insurers could avoid giving consumers a notice of their right to have the commissioner review termination by picking and choosing which reason they list as the basis for termination; the court upheld the regulations’ requirement that this notice be sent to the consumer – via first-class mail – with respect to all planned or actual terminations of health coverage.
Under the commissioner’s regulations, insurers seeking to terminate health coverage for any reason other than nonpayment of premium must continue to provide coverage during the time the consumer’s request for review is being considered by the commissioner, provided the consumer makes the request for review within 30 days after the insurer sends the notice. In any event, if the commissioner determines a termination of health coverage was unlawful, he can order the consumer’s health coverage to be reinstated retroactively provided the premium is paid.
