LOS ANGELES (AP) – Thousands of people who have lost their health insurance could get coverage back after a state regulatory agency last week ordered an independent review of policy cancellations by five of California’s largest insurers.

The Department of Managed Health Care ordered the review of dropped policies the last four years by Kaiser Permanente, Anthem Blue Cross and Blue Shield of California, PacifiCare and Health Net.

A partial review of three of the companies found that 26 people had been improperly dropped, said agency director Cindy Ehnes. Their policies were ordered reinstated immediately, and the insurance companies were also ordered to reimburse medical costs incurred after their insurance was dropped.

The random review of 286 cases found some cancellations were “so clearly wrong that they needed to be reinstated right away,” Ehnes said. Ten were customers with Kaiser Permanente, eight were from Anthem Blue Cross and eight had coverage with Blue Shield of California.

At a news conference in Sacramento, Ehnes said the third-party reviews would begin within a month and cost “several million” dollars to be paid by the insurers, the Los Angeles Times reported on its Web site last week.

In a statement, Anthem Blue Cross said it was “important to clarify that the survey found only a relatively small number of rescissions reviewed were improper.”

Kaiser Permanente issued a similar release, adding that the company had suspended the practice of rescissions since October 2006, and was “awaiting clear guidelines from the state.”

The California Association of Health Plans, a trade association representing 40 full-service health plans, issued a statement saying many insurers had made efforts in recent years to self-regulate.

The trade association also said the threat of rescission was limited to the 2.6 million Californians who pay for their own coverage in individual plans, not those covered by their employers’ plans, Medicare, MediCal or other public programs.

Blue Shield declined further comment, saying they deferred to the trade association’s statement.

The move was applauded by Gov. Arnold Schwarzenegger, who pledged to work with legislators to “ensure this egregious practice is stopped.”

“It’s outrageous that innocent patients have to live in fear of losing their health care coverage,” said Schwarzenegger in a statement.

The order follows an April 16 superior court filing by Los Angeles City Attorney Rocky Delgadillo, who said he would seek up to $1 billion in fines and restitution from Anthem Blue Cross for deceptive practices and unlawful termination of policies.

In recent months, the city attorney’s office sued another insurer, Health Net Inc., for allegedly canceling the policies of sick patients needing expensive treatment. As part of a separate suit, Health Net was ordered to pay $8.4 million in punitive damages to a woman whose policy was scrapped while she underwent treatment for breast cancer.