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Sacramento Bee
Sep 30, 2008 - 01:00 AM

by Shaya Tayefe Mohajer - Associated Press

Schwarzenegger Vetoes Health Insurance Bill

LOS ANGELES, CA -- Gov. Arnold Schwarzenegger vetoed a bill Tuesday that would have cracked down on health insurance companies that cancel policies of people who make expensive claims.

Schwarzenegger, in a memo to lawmakers, called the so-called rescission practice "deplorable," but noted he vetoed the bill because it lacked several consumer protections and was "written by the attorneys that stand to benefit from its provisions."

The measure would have established an independent review process of each case and required that policies be rescinded only if insurers prove consumers willfully misrepresented their pre-existing conditions on a policy application.

Schwarzenegger said he wanted the bill to include six other protections, including a requirement that companies continue coverage for family members of someone whose policy has been dropped.

Assemblyman Hector De La Torre, D-South Gate, who sponsored the bill, said the governor's criticisms were ill-founded. He said the family protection provision was left off the bill because it was contained in a different measure that the governor approved, Assembly Bill 2569.

"The governor is not fulfilling his obligation to the insured population of California," De La Torre said. "For the foreseeable future they will be able to be dumped with impunity, as they have in the past."

De La Torre also noted that the governor had stonewalled legislators in negotiations.

"It's good enough for him to get an applause line in the State of the State address, but it's not good enough for him to follow through and work with Legislature to make it happen," he said.

Daniel Zingale, the governor's top health adviser, said Schwarzenegger's opposition to rescission is clear, noting that the state has taken several actions against health insurance companies during his administration.

Recently, the state Department of Managed Health Care recently reached deals with Anthem Blue Cross and Blue Shield in which the insurers agreed to pay $13 million in fines and offer new health coverage to thousands of people who lost their coverage. The department also reached similar agreements with PacifiCare and Kaiser.

Still, some advocates wanted more action from the state, and called the governor's veto a flip-flop of his position.

"The governor's veto betrays the promise he repeatedly made to Californians to protect them from insurance companies canceling their health insurance when they need it most," said Dr. Richard Frankenstein, president of the California Medical Association, which represents more than 35,000 doctors.

William Shernoff, a leading attorney in rescission lawsuits, said the bill's veto was a measure of the power of the state's insurance lobby. Shernoff said he wasn't involved in authoring the bill.

"(The veto is) going to mean business as usual for the insurance companies, which means continued rescissions and more litigation," he said. "The insurance lobby is very powerful in this state and they got what they wanted, to not have a law that would clarify the situation."

Christopher Ohman, president of California Association of Health Plans, praised the veto and said the bill "missed its mark." The trade association represents 40 insurers, including Anthem Blue Cross, Blue Shield of California and Health Net of California.

"Rather than offer consumers real legal protections from unfair rescission or cancellation, it would have invited dishonesty on applications and lead to price increases and reduced coverage in the individual market," Ohman said.

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