Gov. Arnold Schwarzenegger signed Assembly Bill (AB) 1150, July 22nd. The bill, authored by Assemblyman Ted Lieu, bans health insurance companies from rewarding their employees for canceling or limiting a patient’s health insurance.

“Some health insurance companies and HMOs are rewarding employees for shortchanging patients, a practice that is morally indefensible,” Lieu stated. “We should be holding insurance companies to a standard of responsibility that Californians deserve.”

The bill bans the practice of insurance companies paying bonuses to employees who retroactively cancel patients’ health coverage for no reason.

This practice illustrates the continuing erosion of a healthcare system that puts profits ahead of patients at all costs, and AB 1150 helps restore faith in the healthcare system, said a spokesman for Lieu, whose district includes the local area south of Santa Monica.

Patients who have had their health insurance rescinded or canceled are liable for past medical expenses and can suddenly find themselves in the position of being responsible for medical bills they thought were previously paid by their health insurance, possibly placing them in dire financial straits.

While Schwarzenegger signed the bill because of the urgent need to protect consumers from unfair healthcare rescissions, he says he continues to believe that healthcare reform must be comprehensive. To that end, Schwarzenegger has proposed legislation that would be the building block of comprehensive healthcare reform and is working with the legislature on a joint solution that will protect consumers, control costs and promote prevention, according to a spokesman for the governor.

“Until we achieve comprehensive healthcare reform, stopping unfair healthcare rescissions is an urgently needed consumer protection,” the governor said. “This terrible practice further illustrates the erosion of our healthcare system and the need for comprehensive healthcare reform.

“We are standing up for consumers by putting an end to a deplorable practice, and I will continue working with my partners in the legislature to stop unfair healthcare rescissions once and for all.”

Schwarzenegger’s goal of comprehensive healthcare reform would make healthcare rescissions a problem of the past. The governor’s Health Care Security and Reduction Act proposal would require that all Californians take responsibility for their health coverage while guaranteeing that no Californian is turned away from buying insurance based on their age or medical history, the spokesman said.

To increase consumer protections, Schwarzenegger’s legislative proposal on rescission includes stronger upfront requirements for health plans before they issue coverage to individuals, protects patients from being rescinded if their doctor never told them about a medical condition that affects their ability to obtain coverage and provides for an independent third-party review when a health plan seeks to rescind or cancel an enrollee’s coverage.

As part of the governor’s commitment to covering Californians and stopping unfair healthcare rescissions, the Department of Managed Health Care (DMHC) has reached agreements with all of California’s major health plans over the last few months where they’ve agreed to reinstate coverage to California consumers whose healthcare coverage had been rescinded, according to the governor’s office. Earlier this month, that department fined Anthem Blue Cross $10 million, which is the largest fine ever reported to be collected against an individual health insurer in the nation.

“I commend Gov. Schwarzenegger for signing this important bill,” said Lieu. “The healthcare crisis has left millions of Californians without health insurance or access to medical care.

“Patients should not have to worry about losing their health insurance simply because an employee can make some extra bonus money.”

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