Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) An insurer must submit evidence that a
rescission or, if based on information submitted on or with the application, a
cancellation was not or is not due to the insurer's failure to complete medical
underwriting and resolve all reasonable questions arising from written information
submitted on or with the application before issuing the policy or certificate. In
addition to providing information about the insurer's underwriting of the coverage
proposed to be rescinded, an insurer may submit information pertaining to any
internal or external review conducted prior to or after the rescission. To establish
that it completed medical underwriting, and that it resolved all reasonable
questions arising from written information submitted on or with the application,
before issuing the policy or certificate, the insurer shall submit evidence of the
following to the extent, if any, that the insurer undertook to perform the indicated
activity:
(1) That the insurer followed its
medical underwriting guidelines prior to issuance of the policy proposed to be
rescinded;
(2) That the insurer sought
to obtain the applicant's PHR (Personal Health Record), if available;
(3) That the insurer sought health history
information from external verifiable sources other than the information provided by
the applicant on the health history questionnaire;
(4) That the insurer obtained and evaluated
commercially available medical underwriting information for the applicant, which may
include commercially available claims data, claims data from prior insurers, if
available, or commercially available pharmaceutical information;
(5) That the insurer checked the applicant's
current or prior claims history with the insurer and its affiliates;
(6) That the insurer sought the applicant's
medical records or an attending physician's statement if required by its medical
underwriting guidelines;
(7) That the
insurer checked the applicant's health history information obtained from all sources
for inconsistencies;
(8) That the
insurer underwrote the self-reported health information in light of the applicant's
status as a layperson not schooled in medicine unless the insurer has documentable
grounds to believe the applicant has formal medical training;
(9) That if the insurer was alerted to the need to
check with the assisting agent when applicable, it contacted the agent and obtained
information if the agent indicated awareness of any information not disclosed on the
health insurance application which may be material to the insurer's underwriting of
the application;
(10) That the insurer
identified questions arising from the totality of information obtained from various
sources about the applicant's health history and took appropriate follow-up measures
to resolve any inadequate, unclear, incomplete, conflicting or otherwise
questionable or inconsistent material information on the application prior to
issuing a policy while applying its underwriting guidelines, including but not
limited to, contacting the applicant by phone or mail to resolve inconsistencies and
obtain missing or needed information;
(11) That the insurer:
(A) reviewed the applicant's responses in, or
submitted with, the application and identified all responses contained within the
application or information submitted with the application that appear to be:
1. Inconsistent, ambiguous, or
incomplete,
2. In conflict with
information reported elsewhere on the application, or
3. In conflict with any other information the
insurer was aware of or in the insurer's possession, including but not limited to
medical records, PHR data, prior claims history or an application submitted for
coverage provided by the insurer on an earlier date, or information provided by an
assisting agent; and
(B)
resolved any questions arising from the review pursuant to Subparagraph (a)(11)(A)
of this Section
2274.56.
(12) That the insurer obtained clarification from
the applicant, as reasonable and necessary, to resolve all inconsistencies and
questions prior to issuing a health insurance policy and documented such resolution
and explanation of such inconsistencies and questions; and
(13) That the insurer resolved any inconsistencies
it identified as a result of performing the activities referenced in paragraphs
(a)(10) through (a)(12) of this section. The additional information necessary to
resolve all reasonable questions or omissions may include, but is not limited to,
information obtained through:
(A) the insurer's
further communication with the applicant,
(B) a review of medical records and other sources
of health history or health status information for each individual who has applied
for insurance coverage, or
(C) a
commercial pharmaceutical or medical information
database.
(b) Under
no circumstances shall subdivision (a) of this section be construed to create a
requirement that an insurer must engage in each of the activities enumerated in
paragraphs (a)(1) through (a)(13) of this section in order to complete medical
underwriting and resolve all reasonable questions arising from written information
submitted on or with the application.
(c) An insurer seeking to rescind, or to cancel on
the basis of information submitted on or with the application, a policyholder's,
certificate holder's or other insured's health insurance coverage must submit all
available evidence that the rescission or cancellation investigation preceding the
rescission or cancellation complied with the requirements of Section
2274.78.
(d) In addition to the evidence submitted by the
insurer pursuant to subdivisions (a) and (c) of this section, to demonstrate the
lawfulness of a rescission the insurer shall submit evidence supporting its
allegation that the applicant either performed an act or practice constituting
fraud, or made an intentional misrepresentation of a material fact, to induce the
issuance of coverage. The insurer shall submit evidence that the terms of the policy
to be rescinded expressly prohibited fraud or intentional misrepresentation of a
material fact and that the applicant was warned of this provision.
(e) To demonstrate an allegation of fraud, the
insurer shall submit all available evidence of the following factual assertions:
(1) The insured provided a false answer on an
application for health insurance coverage;
(2) The insured provided the false answer knowing
of its falsity or with reckless disregard for its truth or falsity. In the case of
omission of a required answer to a material question, the insured omitted the answer
knowing of its necessity or with reckless disregard;
(3) The insured provided the false answer or
omitted a necessary response for the purpose of inducing the insurer to grant the
health insurance coverage; and
(4) The
insurer granted such coverage in reliance upon the false answer or omission and
would not have otherwise granted such coverage.
(f) To demonstrate an allegation of intentional
misrepresentation of material fact, the insurer shall submit all available evidence
of the following factual assertions:
(1) The
insured made a misrepresentation in an application for health insurance coverage
either by answering a question untruthfully or by omitting the required
information;
(2) The insured knew the
facts necessary to answer the question truthfully or provide the information
requested at the time he or she completed the application;
(3) The insured answered the question untruthfully
or omitted the requested information deliberately, and not due to mistake,
inadvertence, carelessness, negligence or other innocent reason;
(4) The untruthful answer or omitted information
was material to the insurer's acceptance of the risk in that it influenced the
insurer's acceptance of the risk; and
(5) The application form and terms of coverage
clearly and expressly warned applicants that an intentional misrepresentation of
material fact in the application process, including subsequent requests for
information, could result in later rescission of coverage.
(g) In cases involving cancellation on the basis
of information submitted on or with the application and in cases involving
rescission, Department staff shall, after reviewing the information received
pursuant to paragraph (c)(1) of Section
2274.55 and any information received
pursuant to subdivision (a) of Section
2274.58, determine whether the
evidence, considered as a whole, establishes that the insurer has satisfied the
requirements of Insurance Code section
10384.
(h) In cases involving cancellation on the basis
of information submitted on or with the application and in cases involving
rescission, the assigned administrative law judge shall, after any hearing pursuant
to Section 2274.59, determine whether the
evidence, considered as a whole, establishes that the insurer has satisfied the
requirements of Insurance Code section
10384.
1. New section
filed 11-20-2013; operative 1-1-2014 (Register 2013, No.
47).
Note: Authority cited: Sections
10273.7 and
12926, Insurance
Code; CalFarm Ins. Co. v. Deukmejian, 48 Cal.3d 805 (1989) and 20th Century Ins. Co.
v. Garamendi, 8 Cal. 4th 216 (1994). Reference: Sections
10273.4,
10273.6,
10273.7,
10384,
10384.17 and
10713, Insurance
Code.
