California State Regulators Act to Protect Consumers

For the first time ever, the California Department of Insurance has ordered an insurance company to reinstate an illegally canceled health insurance policy. The L.A. Times reports that this is only the second time insurance regulators have ruled in favor of the consumer in a coverage cancellation case. In the other case, the insurance company was fined, but not ordered to reinstate coverage.

Insurers, including Kaiser and Blue Cross Blue Shield, believe that cancellation of policies must be permitted to combat insurance fraud. Regulators, however, believe that California law does not permit cancellation on the basis of consumer error, so long as the consumer was not willfully intending to deceive the insurer.

These recent actions by the California Department of Insurance are welcome news to consumers and advocates struggling to stay covered in the individual insurance market. Insurance regulators in California - and perhaps other states - may continue to protect consumers whose policies are cancelled for questionable reasons.