The state actions come as more people buy individual insurance policies because they are self-employed, unemployed or don't get coverage at work. More than 18 million people have individual coverage.

Unlike group health policies offered by employers, individual plans require applicants to submit many years' worth of detailed medical information. The insurers use that information in deciding whether to offer coverage and how much to charge.

Most states allow insurers to revoke an individual policy — generally within two years of granting it — if they find an applicant lied or inadvertently omitted information on an application.

Cancellation of a policy is retroactive. Patients must pay for all their past medical care, even if the insurer previously approved and paid for the care. There is little nationwide data on the extent of cancellations. Blue Cross of California has said it cancels fewer than one-half of 1% of all new policies, an average of 1,000 a year.

Prompted by numerous consumer complaints and lawsuits against insurers, state lawmakers are taking action. Among their efforts:

•New Mexico. The Legislature this month passed bills requiring insurers to show that applicants deliberately gave incorrect information on an application. Current law allows cancellation if the error or omission was inadvertent. The governor has not said whether he will sign the bills, says spokeswoman Caitlin Kelleher. Without the law, "the consumer has no ability to defend" against a cancellation, says Melinda Silver, attorney with the state's Managed Health Care Bureau.

•Connecticut. In October, a new law took effect requiring approval from the state insurance commissioner before an insurer can cancel an existing policy.

•California. Legislation introduced last week would require insurers who want to cancel a policy to first win approval from the state's Department of Managed Health Care. Last year, legislators adopted a law requiring insurers to pay for any medical treatment they approve, even if they later cancel the policy.

California state regulators have announced cancellation-related fines against some insurers, including Blue Cross, Kaiser Permanente and Blue Shield of California.

Last week, doctors in California protested letters Blue Cross had sent asking them to report discrepancies between what patients said on applications and what they told their doctors. Doctors balked, as did the California Medical Association. Blue Cross defended the practice but said it would stop sending the letters.

Insurers say only a tiny percentage of policies are cancelled. They say the action is necessary to protect against fraud, such covering up medical conditions.

"To the extent that applicants aren't honest and forthright about their health care status, that means costs are shifted to everyone else," says Karen Ignagni, president of the industry lobbying group America's Health Insurance Plans.

Some analysts say more laws are needed to make it easier for people to apply for and keep insurance.

"There are abusive practices out there," says Karen Pollitz, policy director at the Georgetown Health Policy Institute. "Once you sign on the dotted line, you should be covered, short of fraud."

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By Julie Appleby, USA TODAY

Copyright 2008 USA TODAY, a division of Gannett Co. Inc.