An insurance industry trade group has filed a lawsuit in California seeking to block new state underwriting rules for individual policies.
The rules, which went into effect on Aug. 18, seek to end the practice of rescissions, where insurers revoke members' policies after they fall ill. Under the rules, insurers must conduct a thorough underwriting process before accepting a policyholder and their premiums. The rules also ban insurer investigations into policyholders who have high medical costs.
The lawsuit was filed in Sacramento Superior Court by the Association of California Life and Health Insurance Cos. The complaint says that the California Department of Insurance overstepped its jurisdiction in writing the rules.
“The underwriting rules are burdensome, expensive and they intrude on consumer privacy and will delay insurance policies from being issued,” said Richard Wiebe, a spokesman for the association. He added that the federal health reform law already bans rescissions.
California Insurance Commissioner Steve Poizner, in a statement, called the lawsuit “unconscionable,” adding “sometimes I think representatives in this industry have their heads permanently stuck in the sand.”