California Court Rules That Health Insurance Company Cancellations Frequently Illegal

This is good news for our friends in California.

The substance of the ruling:

• Insurance companies must check the accuracy of the applications before accepting the people for coverage.
• That the insured must be shown to have wilfully misrepresented their health status.
• That the low rescission rates upon application implied a deliberate policy of waiting until the claims rolled in to cancel.

A health plan, the court went on, "may not adopt a 'wait and see' attitude after learning of facts justifying rescission." The court said companies could not continue to "collect premiums while keeping open its rescission option if the subscriber later experiences a serious accident or illness that generates large medical expenses."