Avoid losing your health care coverage

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NEW YORK (CNNMoney.com) -- Thousands of Americans have found themselves with a cancelled health insurance policy or a denied claim, just when they need it most.

In California for example, insurers paid out about $19 million in fines for dropping policyholders, and the attorney general is investigating reports that insurers are denying claims at rates close to 40%.

Follow these tips to avoid any lapse in your coverage.

1. Know the process. Rescission is a term used when an insurance company cancels a policyholder's coverage on grounds that the company was misled on your application. For example, forgotting to mention that you were hospitalized for chest pains could be grounds for cancelling your coverage, should you later develop a heart condition and make claims to your insurance company.

Health Net, an insurer in California, was recently fined $1 million because employees there were offered bonuses if they found a reason to cancel policies. Generally insurance companies have two years to go back and find discrepancies in your insurance application according to Amir Mostafaie of eHealthInsurance.com.

2. Appeal the cancellation. There are steps you can take if your policy has been cancelled. First, find out why you've been dropped. Get in touch with your insurance company. Next, call your state health insurance department and describe your situation. The folks there can act as intermediaries between you and the insurance company.

But if you don't seem to be getting anywhere, simply apply with a different carrier. Your relationship with the insurance company is already sullied, so go with a different company.

And when you fill out these applications, it's natural to forget some dates, or the names of doctors. You can always make a note at the bottom saying the dates were estimated, according to eHealthinsurance.com.

3. Appeal denied claims. If your claim is denied, make sure you find out what the appeals process is. Every plan should have a clear appeals process that you must follow. And don't delay. Sometimes you only have 60 days to start the process. Make sure you collect any paperwork you already have, such as bills, physician information or physician referrals, and keep a log of every telephone call you make.

If your attempts to deal with the insurance company informally are not successful, you will have to file a formal appeal. You'll probably have to submit an appeal in writing.

-- CNN's Jen Haley contributed to this article.

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