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State Sen. Ted Gaines has filed a lawsuit against the state health insurance exchange, claiming agency officials exceeded their power when they instructed participating health insurance companies to terminate existing policies for hundreds of thousands of Californians.

Covered California later declined a presidential offer letting insurance companies extend the canceled policies to roughly 1 million Californians.

The lawsuit, filed in Los Angeles County Superior Court, seeks to prevent the exchange from requiring cancellation of policies that do not comply with the provisions of the federal law. That, presumably, would allow insurance companies to continue offering the plan.

"A lot of people have policies that have not changed, and they've had them in place for decades, and now they are out," said Gaines, R-Rocklin, a candidate for state insurance commissioner. "They were forced out of the plan into something that was more expensive and in many cases with higher deductibles. There are some real abuses."

Gaines' lawsuit also alleges the exchange is wasting taxpayer dollars on public relations.

Anne Gonzales, a spokeswoman for the exchange, declined to address Gaines' claims.

"Covered California hasn't received service in this matter," she said. "When it does, our legal team will review the complaint."

The exchange last fall refused to give insurance companies more time to end individual policies that don't conform to the federal heath care overhaul. The cancellations applied to individual plans purchased after passage of the health law.

The decision came shortly after President Barack Obama in November allowed states to extend millions of canceled insurance policies for one year amid uproar over his statements that customers who like their plans could keep them.

Among the most vocal critics of the exchange at the time was state Insurance Commissioner Dave Jones, a Democrat. Jones also used the threat of legal and other action to persuade two insurance industry giants to delay terminating scores of plans across the state.

Still, Gaines, the president of Gaines Insurance in Roseville, argues Jones did not do enough to prevent the plans from being canceled.

His lawsuit also requests an order from the court to halt exchange spending on things like infomercials and public relations. Specifically, it identifies as unrelated to the exchange's mission allocating $1.3 million for a six-hour infomercial featuring health and fitness guru Richard Simmons, more than $10 million on a contract with the public relations firm Weber Shandwick and "untold funds" on a contract with Ogilvy Public Relations.

PHOTO: Senator Ted Gaines, R-Rocklin, during session in the Senate chambers in Sacramento on March 11, 2013. The Sacramento Bee/Hector Amezcua.


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