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When the private sector needs a nudge from the public

The case of Rita Corwin, wrongly denied a long-term care claim, illustrates how regulations protect consumers.

David Lazarus

9:56 PM EDT, April 25, 2013

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It's a common mantra among free-market-loving conservatives that government regulations hinder business growth and cost workers jobs.

That may be true for some regulations, and it never hurts to go back and rethink old rules.

But it's also clear that many regulations are undeniably necessary to protect consumers from unfair, unsafe or downright reckless business practices.

One example was the overhaul of financial regulations after leading banks trashed the global economy with their irresponsible dealings. Another was the retooling of food-safety regulations several years ago after one of the worst salmonella outbreaks in U.S. history.

And on a smaller but no less important scale, there's the case of Rita Corwin, who thought she had protected herself by buying long-term care insurance.

I wrote in December about how Corwin, 90, fractured her hip in a fall in October 2011. A hip replacement followed. When it became clear that she'd need a caregiver to help out, her insurer, Washington National, made good on her policy and covered $150,000 worth of assistance.

Corwin subsequently experienced pain in her neck and shoulders. Her doctor diagnosed the problem as severe cervical spondylosis, a condition affecting the bones of the neck, and recommended that Corwin once again turn to a caregiver for help.

But Washington National denied the claim, saying that six months hadn't elapsed since treatment had ended for the fractured hip. It noted that Corwin's policy specifies that at least half a year of "normal daily living" must pass before a claim can be made for "the same or related cause."

Corwin's daughter, Leni, appealed the decision, pointing out that the new claim wasn't for the same or related cause. It was for an entirely different cause with an entirely different medical diagnosis. But Washington National denied the appeal.

The insurer simply refused to accept that Corwin's neck problem was unrelated to her earlier hip injury, regardless of what her doctor might say.

Nancy Kincaid, a spokeswoman for the California Department of Insurance, told me this week that state officials "aggressively advocated" for Corwin after reading my column.

"Although the insurer initially refused to reverse this wrongful denial, after continued aggressive action by CDI, the company finally agreed to settle the matter by considering the neck condition as a new occurrence," she said.

Washington National agreed to cover the new cost of a caregiver and to pay $6,500 to compensate Corwin for expenses incurred during the appeal process.

Barbara Ciesemier, a Washington National spokeswoman, declined to comment.

Corwin's daughter told me this week that the insurer had probably concluded it couldn't defend its denial in the face of an official investigation.

"I think they also decided it wasn't worth it to get into a dispute with the Department of Insurance," she said.

In a perfect world, we wouldn't need rules requiring simple decency, and we wouldn't need regulators to step in and enforce those rules whenever a company's moral compass breaks down.

But it's not a perfect world. So to anyone who says that regulations are bad for business, I say: Think about Rita Corwin.

What if she'd been your mother?

Or you?

Pharmacy legislation

Anthem Blue Cross backed off a plan to require some policyholders to buy their prescription drugs from a single mail-order pharmacy after I reported in January that this could violate California law.

Now a state lawmaker wants to make sure this doesn't happen again, sponsoring legislation that would prohibit drugstores from participating in any such plans.

The bill, AB 299, introduced by Assemblyman Chris Holden (D-Pasadena), passed the Assembly's Business, Professions and Consumer Protections Committee this week. Its next stop is the Assembly Health Committee.

"I have no problem with voluntary use of mail-order pharmacies," Holden told me. "I do have a problem with making it mandatory."

Anthem, California's largest for-profit health insurer, said in November that it was imposing the new rule for so-called specialty medications used to treat major illnesses, such as cancer and HIV/AIDS. The company said the limitation would help keep costs down for patients and businesses.

The problem with Anthem's view is that California's Unruh Civil Rights Act specifies that all people must be treated equally "no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status or sexual orientation."

Atty. Gen. Kamala D. Harris said that any rule that forces some people to buy their meds from one drugstore but allows others to shop elsewhere could violate the law.

Holden's bill still would allow people to shop for drugs online or by mail and it still would allow insurers to offer lower prices to people who order their meds online. But it would be up to the patient to decide whether to participate in any such programs.

It shouldn't be necessary to bar pharmacies from joining no-choice drug plans, but Anthem spokesman Darrel Ng told me the insurer still believes such plans are legal. So Holden's additional safeguard appears necessary to ensure that consumers are protected.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.