That sounds weird - I thought there's COBRA and HIPAA explicitly provides plans for people with uninterrupted (for more than 63 days) coverage, regardless of medical history, e.g.: http://www.dmhc.ca.gov/dmhc_consumer/hp/hp_hipaacp.aspx

But of course, not knowing your specific situation (and not being a lawyer) I don't know what happened, but it seems like whoever denied your coverage may have violated the law.